AXA launches new generation volatility arbitrage fund
AXA Investment Managers (AXA IM) has launched AXA KAPPA Opportunities, the second generation of its innovative credit-equity volatility arbitrage fund, AXA KAPPA.
AXA KAPPA, which was launched in May 2003, soft closed at USD98 million after only eight months. Both AXA KAPPA and AXA KAPPA Opportunities exploit arbitrage opportunities from the volatility levels derived from the debt and equity of the same company, specifically using Credit Default Swaps (CDS) to capture attractive volatility levels on the long and short side.
As an additional feature to the first generation fund, AXA KAPPA Opportunities will be able to implement both long and short CDS positions, offering potential opportunities on both sides of the trade. As such, the new fund will be more opportunistic and benefit from both rises and falls in the volatility market. AXA KAPPA Opportunities targets performance of 15 - 20%, with volatility below 10%.
The AXA KAPPA funds are a natural extension of AXA IM's market leadership in credit and structured credit. AXA IM currently manages EUR 60 billion in credit (investment grade and high yield). Significant resources support this business, including 19 experienced credit research analysts and 28 credit portfolio managers. AXA IM has developed a unique expertise in the structured credit business with 8 CDOs issued for more than EUR 9 billion outstanding notional.
Guillaume Boulanger, fund manager of AXA KAPPA Opportunities said: "The evolution of the credit derivative market, in terms of size and liquidity, has made this innovative strategy possible. We firmly believe this growth and evolution will allow these types of strategies to mature and develop, especially as investors realise that they can exploit the link between credit, equity and the underlying volatility.
"With AXA KAPPA, we offered a very innovative strategy, providing attractive credit protection. With AXA KAPPA Opportunities, we can now offer a more trading-oriented and opportunistic strategy by implementing the two sides of the trade."
The credit-derivative market has been growing over the past few years, with the global credit derivative market estimated to be USD 4.8 trillion in 2004. The market has also been improving in terms of liquidity and more standardised documentation.
AXA KAPPA Opportunities fund is a sub-fund of Dublin-domiciled AXA Alternative Investments, a qualifying investor fund (QIF) and has USD and a EUR denominated share class, both of which are listed on the Irish Stock Exchange. The minimum investment is EUR 250,000.
Two dedicated investment specialists manage the fund: Guillaume Boulanger and Christophe Herpet, specialising in credit derivatives and financial models. The portfolio management team is supported by 19 credit analysts and 10 credit derivative specialists. The team is based within AXA IM's Structured Credit team in Paris and is part of AXA IM's Structured and Alternative Investment Management (SAIM) division.
Background Note: AXA IM is a major player in European credit management, with EUR 60 billion of credit assets under management. AXA IM is the European leader in CDO transactions, with 10 CDOs (both high-yield and investment-grade) issued since 1998, totalling over EUR 10 billion in assets under management. AXA IM has also contributed to setting a market standard in credit derivative management having traded the first Credit Default Swap (CDS) in 1997. AXA IM has over EUR 10 billion of Credit Default Swaps under management.
AXA Investment Managers (AXA IM) is a multi-specialist asset management company within the AXA Group, a world leader in financial protection and wealth management. AXA IM is one of the largest European-based asset managers with approximately EUR 306 billion under management. AXA IM employs over 2,100 people and serves clients in eleven countries.
AXA IM is wholly owned by the AXA Group, a global leader in financial protection and wealth management, with assets under management in excess of EUR 742 billion.
SAIM is the structured and alternative division of AXA IM. The SAIM team consists of over 60 professionals based in London, Paris, New York and Asia. As at 31 December 2003 SAIM had EUR 26.5 billion under management, and focuses on four business lines: Structured & Derivatives, Index Management, Structured Credit and Hedge Funds.
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