James Williams, Hedgeweek

BlackRock’s Fink raises concerns over leveraged ETFs… UCITS enjoy biggest quarterly net inflows since 2006…

Sun, 01/06/2014 - 11:15

Alceda Fund Management SA this week announced a new fund on its Alceda UCITS Platform (AUP). The CCMG Navigator – Tactical Fixed Income Fund, managed by Philadelphia-based Clark Capital Management Group, Inc. The Lux-domiciled fund continues the strategy of the Clark Capital Navigator Fixed Income Total Return Investment Solution, which launched in the US in 2005.

Founded in 1986, Clark Capital manages over USD2.8bn in client assets. Within the mutual fund, portfolio managers seek to deliver income and risk control while reducing interest rate sensitivity. The firm believes a crucial component of the fund is its ability to shift out of lower quality areas when needed and invest in high quality debt and/or cash. The strategy aims to deliver excess alpha over a full market cycle measured against the Barclays Capital US High Yield Bond Index and Barclays Capital US Aggregate Bond Index.
 
The Fund is expected to be particularly popular with Latin American investors looking for an opportunity to invest in a tactical international fixed income strategy. Alceda’s partner, AFINA International Advisors, a specialist financial services company, will market the fund to its investor base in Latin America.
 
Harry Clark, Chairman and CEO of Clark Capital Management Group said: “Fixed income has dominated investment inflows over the last decade as global investors have sought alternatives to volatile equity markets. We believe flexibility is the key to alpha and that a disciplined quantitative research process may lead to consistent long-term performance. Our prudent, flexible and highly adaptable approach enables us to seek to constantly balance risk while pursuing alpha and we are delighted to have partnered with Alceda as we look to expand our Latin American investor base.”
 
Michael Sanders, CEO and Chairman of the Board for Alceda, commented: “The Alceda UCITS Platform provides an easy solution for asset managers to launch their investment strategies in a UCITS format. Through our established network of distribution partners, in this case AFINA, we aim to take the fund global. Demand for Luxembourg-domiciled UCITS structures is growing in Latin America with investors looking for time tested funds that provide a level of sophistication and transparency and better returns than is often available in local markets.”
 
UCITS funds enjoyed a surge in net assets in Q1 2014 of EUR148bn – the largest quarterly net inflow since 2006 according to figures published by the European Fund and Asset Management Association (EFAMA). This compares with net sales of EUR51bn in the previous quarter.
 
Long-term UCITS (all UCITS funds excluding money market UCITS funds) experienced net inflows of EUR134bn during the quarter, up from EUR72bn in the previous quarter. Bond funds were the main driver behind this surge in net inflows attracting a significant EUR61bn in inflows compared to just EUR3bn in previous quarter. Net inflows remained strong for equity UCITS at EUR27bn although this figure is down slightly on the EUR40bn of inflows recorded in Q4 2013.
 
Total UCITS net assets rose 3.5 percent during the first quarter to stand at EUR 7.106tn at end March 2014. The combined assets of the investment fund market in Europe, (i.e. the market for UCITS and non-UCITS funds), increased by 3.8 percent in Q1 to break through the EUR10tn mark to stand at EUR 10.156tn at end March 2014.
 
One corner of the UCITS industry that continues to grew at pace is the ETF market. However, this week BlackRock CEO Larry Fink said that leveraged ETFs (which use derivatives and debt to amplify returns) had structural problems that could “blow up” the whole industry one day, reported Reuters (UK). BlackRock is one of the world’s largest asset managers with some USD4tn in client assets, of which approximately 25 per cent are ETF assets.
 
Unsurprisingly, leveraged ETFs do not feature highly on BlackRock’s wishlist. Fink was quoted as saying: “We’d never do one. They have a structural problem that could blow up the whole industry one day.” Fink was speaking at a Deutsche Bank investment conference in New York.
 
A leading leveraged ETF provider, ProShares, was quoted by Reuters (UK) as disagreeing with Fink’s comments. Tucker Hewes, a spokesperson for the firm, said that leveraged ETFs were well regulated, transparent products and that “there was no credible evidence that they have any harmful effect on the markets or our industry”. 


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