James Williams, Hedgeweek

China managers beginning to look at RQFII fund opportunities… GSAM launches three multi-asset UCITS funds…

Alternative UCITS funds made gains of 0.22 per cent in June according to Alix Capital, provider of the UAI Global Index. Last month’s performance was characterized by small performance dispersion. The majority of strategies made modest gains of between 0.20 per cent and 0.97 per cent.

The best performing strategy indices were the UAI CTA, up 0.97 per cent, the UAI Emerging Markets, up 0.85 per cent, and the UAI Multi-Strategy, up 0.57 per cent. Thanks to those returns in June the UAI CTA is now the best performing index since the beginning of the year, up 1.70 per cent. The next best performers YTD are the UAI Multi-Strategy and the UAI Fixed Income indices, up 1.62 per cent and 1.58 per cent respectively. On a YTD basis the UAI Global Index is up 0.94 per cent. The worst performing strategy so far in 2014 is the UAI FX, down 1.32 per cent.

BNY Mellon Investment Management this week announced the launch of a UCITS version of its Absolute Insight fund reported FTAdviser. The Dublin-domiciled fund, which is managed by subsidiary Insight Investment, has EUR90mn of day-one capital from clients across six EU countries. In total, the Absolute Insight range manages assets in excess of GBP5bn.

The fund invests across a range of absolute return strategies and targets a positive return with low correlation to equity markets on a rolling 12-month timeframe. The UCITS fund will aim to mirror the existing UK-domiciled Absolute Insight fund, which is not UCITS-compliant, as closely as possible.

Abdallah Nauphal, CEO of Insight Investment was quoted as saying: "We believe absolute return investment approaches will play an increasingly important role in portfolios. The addition of a multi-strategy UCITS fund to the Absolute Insight range will open this capability to the broadest range of investors in Europe." Sonja Uys, a member of the fund management team said that the low correlation between the individual strategies “makes this an effective portfolio diversifier.

"It also results in a fund with very low correlation to traditional asset classes or world equities, that has extremely low volatility and hence a much lower risk profile.”

Goldman Sachs Asset Management has launched three multi-asset funds reported InvestmentWeek; the first such funds to be created by GSAM using the UCITS wrapper. Known as the Wealthbuilder Multi-Asset Funds, they span medium to long-term investment horizons. The ‘conservative’, ‘balanced’ and ‘growth’ portfolios aim to preserve wealth, enhance wealth and create wealth respectively. 

GSAM’s 70-strong multi-asset class investment team, Global Portfolio Solutions, are to manage the three funds. David Copsey and Raymond Chan head up the team.  
The funds will offer exposure to high yield bonds, emerging market debt, small-caps and passive funds. The GS Wealthbuilder Multi-Asset Conservative fund will mainly invest in fixed income securities, while the Balanced and Growth funds will assign a greater allocation to equities and employ higher levels of risk.

Kathryn Koch, international head of Global Portfolio Solutions, was quoted as saying: “These Wealthbuilder funds represent a great retirement option for retirement savings. We are going to continue to put forward innovative solutions in this area.”

Interest is starting to grow among Chinese asset managers to launch UCITS-compliant RQFII funds according to David Li, Hong Kong chief executive at French fund administrator CACEIS, reported AsianInvestor this week. This April, Luxembourg’s regulator, the Commission de Surveillance du Secteur Financier (CSSF), gave its imprimatur for UCITS funds to be launched that invest solely in China’s interbank bond market.

The Grand Duchy is set to become a leading offshore centre for the Renminbi (RMB) as the Chinese currency starts to become more international. Under RQFII, Chinese asset managers with operations in Hong Kong have the opportunity to raise global investor assets, to then invest directly into China’s capital markets. Earlier this year, Ireland launched its first ever RQFII ETF – the CSOP Source FTSE China A50 UCITS ETF.

This approval by CSSF to launch UCITS funds to gain access to China’s interbank bond markers marks the next stage of evolution in the RQFII program; good news for retail and institutional investors wishing to gain access to China’s economic growth story. Yields on Chinese bonds are higher than their European equivalents (e.g. 5-year Chinese government bonds are yielding 3.88 per cent compared to 2.11 per cent for UK bonds).  

Li said that CACEIS was currently in discussions with a number of Hong Kong subsidiaries about obtaining CSSF approval to launch RQFII interbank bond funds, reported AsianInvestor

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