Aviva launches fund of hedge funds managed by Benchmark Plus
Aviva Funds International Ltd, the European fund operation of Morley Fund Management (Morley) has launched the first sub-fund, called Alpha Optimum, of its Aviva Alternative Funds SICAV.
Morley is the asset management arm of the UK insurance group Aviva Plc, which as a group has worldwide assets under management in excess of Euro 340 billion.
For the Alpha Optimum sub-fund, Morley has contracted Paradigm Partners NW Inc, trading as Benchmark Plus (Benchmark Plus), a privately owned alternative asset management company based in Tacoma, Washington in the United States as Portfolio Manager.
Aviva Alternative Funds is a Luxembourg-domiciled fund of hedge funds and is structured as an umbrella fund with multiple sub-funds. The new sub-fund, Alpha Optimum (full name is Aviva Alternative Funds -Alpha Optimum), is a fund of hedge funds that seeks to achieve high returns independent of the movements in the equity or fixed income markets.
Ian Ainscow, Head of International Retail at Morley, said: "The launch of this fund marks an important step in the evolution of our product range to embrace both fund of fund structures and alternative investments. The portfolio manager of Alpha Optimum sub-fund, Benchmark Plus, achieves strong performance by hedging the market risk of the underlying funds, thereby generating pure Alpha. This makes Alpha Optimum one of the few funds that actually lives up to the term 'hedge fund'."
Commenting on the demand for such funds in the institutional market, Mr Ainscow added: "Many institutions in Europe have allocated significant proportions of their assets to alternative products over the past 3 to 4 years as diversification opportunities in traditional equities and bonds have reduced. Pension fund managers in the US have been successfully investing in hedge funds for some time and we believe that the trend to follow suit in Europe is likely to continue."
Benchmark Plus founders Mike Dunmire and Robert Ferguson have used their combined experience of more than 30 years exclusively devoted to alternative investment strategies, to create a unique investment approach, which has delivered a "pure alpha generator".
Morley aims to create a high risk-adjusted rate of return by investing in a portfolio of hedge funds, as selected by Benchmark Plus, that have a proven history of generating excess returns on a risk-adjusted basis (Alpha).
Morley will be working closely with Benchmark Plus to provide resources on quantitative analysis, asset allocation and derivatives hedging in order to continually maximise risk-adjusted returns for the fund. Morley and Benchmark Plus will be forming a joint Investment Committee to oversee and approve all investment decisions for the fund.
Alpha Optimum will be available in two Share Classes; Institutional Share Class and Private Share Class. The Institutional share class will be targeted at larger institutional investors, pension funds, insurance companies, asset managers and asset allocators. The Private share class will be targeted at professional investors. The minimum investment amount for the Institutional Share Class is Euros 1 million and for the Private Share Class is Euros 25,000. The Fund will be denominated in Euros, and non-Euro holdings will be hedged into Euros by Morley.
Commenting on the appointment of Benchmark Plus Partners as Portfolio Managers, Neil Smith, Director of Aviva Alternative Funds said: "We carried out an extensive review of fund of hedge fund managers globally. Benchmark Plus fulfilled all of our selection criteria; sustainable strong investment performance based on absolute and risk-adjusted returns, a clearly defined investment process with robust management of risk and strong commitment by their management; and they impressed us with innovative approach in designing their investment process."
Mr Smith continued: "The track record of Benchmark Plus is outstanding. We are buying into a process that has shown annualised returns of 16.7%, annualised volatility of 5.6% and a downside deviation of 1.08% from the risk free rate of return (90 day Treasury Bill) during the period 1996 through March 2003. (source: Benchmark Plus). In addition the returns have virtually no correlation to any major financial index. We are proud to be able to link the skills that Benchmark Plus possess with the quantitative risk management and governance framework that Morley Fund Management offers, and we look forward to conferring these benefits on our clients."
Background Note: Aviva Funds International Limited is the Marketing and Distribution Agent for Aviva Alternative Funds.
Morley Fund Management Limited is the Investment Manager of Aviva Alternative Funds. Morley Fund Management Limited and Aviva Funds International Limited are Aviva group companies.
Aviva is the UK's largest insurance group, one of the top-five life insurers in Europe and has substantial positions in other markets around the world. Aviva is the world's seventh-largest insurer based on worldwide gross written premiums.
Aviva's principal business activities are long-term savings, fund management and general insurance, with worldwide premium income and investment sales from ongoing business of more than £28 billion, and over £200 billion in assets under management at 31 December 2001.
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