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The alternative UCITS market saw its AuM grow by 15.6 per cent to EUR184.2bn through the first six months of 2014 according to the Alceda Half Yearly UCITS Review. However, whilst inflows remain strong, performance has tailed off. Through the first half of 2013 alternative UCITS funds returned 5.95 per cent compared to just 0.52 per cent this year.
Having ended 2013 as the best performing strategy with gains of 12.3 per cent, the AH Equity Long Short Index was flat to the end of June 2014. Despite this, Equity Long Short strategies have seen AuM rise 66.8 per cent to EUR30.7bn since the end of last year. Likewise, Event Driven strategies have seen AuM increase 88.2 per cent to EUR3.2bn over the period.
Managed futures was the only strategy to lose assets, declining -6.7 per cent in H1 2014.
The first half of 2014 saw a healthy pipeline of new alternative UCITS launches with 16 new funds across strategies coming to market, particularly in Equity Long Short strategies. Interestingly, the report also finds that 6 per cent of funds in the sector are now limiting capacity after attracting strong inflows over the last couple of years; they account for 13.6 per cent of total assets under management.
Michael Sanders, CEO and Chairman of the Board, Alceda Fund Management S.A. said: “These results show the continued popularity and demand for alternative UCITS strategies globally. Investment flexibility, demand for absolute return solutions and profound changes in the hedge fund industry and supportive regulatory framework are driving this expansion over the long-term.
“There is also an issue of capacity which is most acute in Equity Long Short where 48 per cent of AUM is currently invested in closed funds. We believe that this is compelling evidence of the strong demand for high quality alternative UCITS products and should encourage managers to launch further strategies in UCITS format.”
Pictet Asset Management this week announced it had expanded its Total Return fund range with the launch of PTR-Agora, an equity market neutral fund with a long/short investment approach.
The fund managers aim to identify catalysts that will have an impact on the share prices of European large cap companies, including corporate restructurings and M&A activity. The portfolio invests in approximately 35 core investment strategies, each expressed through a combination of long and short positions.
The fund is managed by a three-member team led by Elif Aktuğ, who has over a decade of experience managing European equity long/short portfolios. The other two members are Benoît Capiod and Vincent Ijaouane.
The team have been managing the same European long/short equity strategy at Pictet AM through a Cayman-domiciled fund for over three years. Launched on July 4, 2014, the PTR-Agora fund is UCITS IV compliant, offering weekly liquidity and daily transparency.
Elif Aktuğ commented: “We believe the availability and cost of financing, the strength of European corporate balance sheets, the search for non-organic sources of growth and the growing stability of the economic environment, all point to a continued pick-up in M&A activity.”
The PTR-Agora fund is one of five strategies in Pictet AM’s Total Return fund range. The others include: PTR-Corto Europe (Europe mid-small cap equity long/short), PTR-Mandarin (China equity long/short), PTR-Kosmos (global long/short credit) and PTR-Diversified Alpha (market neutral multi strategy).
UCITS V will not necessarily lead to fund managers receiving less pay according to Shay Lydon, a partner in the Asset Management and Investment Funds Group at law firm Matheson.
Lydon, writing on FTSE Global Markets on 29 July 2014, said that while it is clear that UCITS V requires that the relationship between pay and performance be strongly correlated, and more transparent, “neither of these factors will necessarily have a negative impact on remuneration. “In particular, unlike CRD IV, UCITS V makes no attempt to cap variable pay. Instead it actually recognises the very positive role that variable pay can play in promoting fund performance - which is ultimately likely to be to the ultimate benefit of all investors,” said Lydon.
Context Asset Management’s alternative mutual fund – Context Alternative Strategies Fund – has been made available on three mutual fund platforms: Fidelity Investments, Charles Schwab and Pershing.
Philadelphia-headquartered Context Asset Management is a new firm having only been established earlier this year by a team of alternative investment professionals led by CEO Steve Kneeley. The addition of the Context Alternative Strategies Fund to these three platforms signals the growing importance of “liquid alternatives” in the US – equivalent to alternative UCITS in Europe.
“At a time when many retail and institutional investors are seeking access to the strategies of highly knowledgeable hedge-fund managers, we are providing this exposure in a liquid and transparent investment vehicle,” said Kneeley.
The Context team looks to identify emerging and established managers with exceptional talent and historically successful strategies, and creates single- and multi-manager mutual funds that deliver those strategies to advisors and their clients.
The fund is a multi-manager multi-strategy product seeking to generate capital appreciation, while emphasising a low correlation to the broader US bond and equity markets.
John Culbertson, managing director and CIO of Context added: “We continue to deliver innovative products that seek to combine the low volatility and low correlation of hedge funds with the liquidity and transparency of mutual funds. As demand for alternative mutual funds continues to grow, our fund's inclusion on some of the major mutual fund platforms enables us to help a wide array of investors use this type of product while striving to meet their financial goals.”
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