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James Williams, Hedgeweek

Net sales of long-term UCITS decline in June… Morgan Stanley launches MS Kairos Enhanced Selection UCITS fund…

Source, one of Europe’s leding providers of Exchange Traded Products (ETPs), has launched the Source JP Morgan Macro Hedge Dual Vega Target 4% TR UCITS ETF. The ETF aims to provide cost-effective exposure to volatility and is the third ETF in the JP Morgan Macro Hedge series.

Volatility is an attractive hedge in times of macro-economic stress but can be costly over the long term. J.P. Morgan’s Macro Hedge indices aim to capture spikes in volatility and, when markets are calmer, to generate a positive return. 

The JP Morgan Macro Hedge Dual Vega Target 4% TR Index takes exposure to US equity volatility, switching from long to long/short exposure depending on market conditions. During times of market stress, it adds long exposure to European equity volatility. The index also uses a “vega target” mechanism, adjusting its leverage between 0 per cent and 100 per cent depending on the absolute level of volatility.

“This is a new feature for the JP Morgan Macro Hedge index series,” said Rui Fernandes, Head of Equity and Funds Derivatives Structuring at JP Morgan. “Investors need a hedging instrument that will capture the big spikes in volatility but doesn’t see large gains and losses when market conditions are more normal. By reducing exposure in these circumstances, we aim to generate more stable performance.”

“Exposure to alternative assets such as volatility continues to evolve,” added Source CEO, Ted Hood. “Source has become a market leader in this segment, by offering efficient, transparent and innovative products.”

The ETF will trade on the London Stock Exchange in USD. It is registered for sale in Austria, Finland, France, Germany, Ireland, Italy (for institutional investors only), Luxembourg, the Netherlands, Norway (for institutional investors only), Switzerland (for institutional investors only), Sweden and the UK.
In other fund launch news, Morgan Stanley has added the MS Kairos Enhanced Selection UCITS Fund to its FundLogic Alternatives Plc umbrella.
The Fund provides exposure to Kairos’ bottom-up, deep fundamental research capabilities and dynamic risk mitigation approach; investing across Europe with a holistic and diversified opportunity-based investment philosophy. The FundLogic platform currently has more than USD2.7bn in assets under management and this latest addition expands Morgan Stanley’s offering of European equity strategies.
“We are delighted to announce the launch of the MS Kairos Enhanced Selection UCITS Fund, a fund managed by a proven and extensively experienced team of absolute return fund managers,” said Stephane Berthet, Head of the FundLogic Alternatives Platform at Morgan Stanley. “Focusing on pan-European equities, this long/short equity strategy is a powerful combination of fundamental bottom-up research and dynamic management of the portfolio’s risk exposure. We believe it will strengthen our existing offering by expanding our coverage of the European region.”
“We are excited to launch a leveraged version of our successful European long/short equityFun d under the FundLogic Alternatives Plc umbrella. The new Fund will enhance the risk/return objective of our Kairos Selection Fund, providing a complementary offering to the unlevered strategy and thus allowing us to cater to the full spectrum of investor requirements,” said Stefano Prosperi, CEO of Kairos Investment Management Limited.
The Kairos Group was founded in 1999 and currently has over USD8.5bn in assets under management. It is one of Italy’s leading independent asset managers.
Carne Group, the leading global provider of independent oversight and governance solutions for asset managers, has published a new edition of its popular UCITS Guide for Investment Managers. The guide has proved popular with product development teams seeking practical guidance on distributing funds under the UCITS IV Directive.
The new edition of the guide has been updated by Carne’s team of regulatory experts to include the latest changes to European funds legislation and now addresses the information needs of both alternative and long only fund managers.
John Donohoe, CEO of Carne Group said: “We have found that our UCITS Guide has proved particularly popular, as a handy-sized reference digest of the critical information product developers need to be aware of when launching UCITS funds.”
Carne has been working closely with fund managers launching or re-domiciling UCITS funds, both alternative and traditional, for over 10 years. It has successfully licensed UCITS management companies in both Ireland and Luxembourg. Carne’s team of UCITS experts, which worked on the guide, is considered one of the leading repositories of expertise on the Directive and the distribution and registration requirements it carries with it.
Aymeric Lechartier, Managing Director with Carne added: “Our guide has been specifically written to address the practical questions that fund managers will have as they go about developing a UCITS fund.”
Net sales of UCITS in June fell to EUR22bn from EUR43bn in May due to a decline in net sales of long-term funds and increased net outflows from money market funds, according to the latest Investment Funds Industry Fact Sheet published by the European Fund and Asset Management Association (EFAMA).
Net inflows to long-term UCITS were EUR37bn in June, down from EUR48bn in May. Equity funds attracted just EUR2bn – compared to EUR7bn in May – whilst bond funds recorded a drop in sales from EUR20bn to EUR13bn. Money market funds registered net outflows of EUR15bn, compared to net outflows of EUR5bn in May.
Bernard Delbecque, Director of Economics and Research commented: “Net sales of long-term UCITS declined in June on the back of mixed economic data and heightened geopolitical tensions.”

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