New OEICs track volatility as an asset class

Investment bank Dresdner Kleinwort and Kleinwort Benson, the private bank, are launching two new UCITS III funds on the Gresham Defined Funds platform.

The new DEVA 80 & 90 Alpha funds  for the first time offer returns on equity volatility through a UCITS III compliant structure.

The Gresham Defined Funds platform was introduced by Dresdner Kleinwort in autumn 2005, allowing a series of structured products to be created for institutional and asset management clients based on a wide variety of asset classes.

The latest funds, co-sponsored by Kleinwort Benson, are sterling denominated Open Ended Investment Companies (OEICs), domiciled in the UK, authorised by the Financial Services Authority and listed on the London Stock Exchange offering investors daily liquidity

The DEVA 80 and DEVA 90 Alpha Funds are designed to target absolute returns of 4% p.a. and 9% p.a. accordingly above the Bank of England base rate, with very low levels of volatility; 2-3% and 4-5% respectively. Both funds aim to achieve an upwardly adjusted capital protection - of 90% for the DEVA 90 Fund and 80% for the DEVA 80 Fund - on the highest net asset value achieved on launch and at monthly rebalancing dates.

Serge Desmedt, a Managing Director in the Capital Markets division of Dresdner Kleinwort, said: 'These funds exploit the widely observed difference between implied volatility and realised volatility in the US equity market using the S&P 500 Index. An algorithmic strategy is adopted to take advantage of this difference, hence there is no reliance on a fund manager running a dynamic trading strategy. The funds aim to provide absolute returns and track the Dresdner Equity Volatility Arbitrage (DEVA) Fund Indices which means performance can be tested back over some 16 years'.

Andy Halford, Head of Structured Products at Kleinwort Benson, said: 'We are delighted to be involved as Co-Sponsor and Investment Manager in the launch of these highly innovative products. Using equity volatility as an asset class in this way enables us to offer investments that have historically given very attractive returns with extremely low volatility and low correlation to traditional asset classes within a user friendly wrapper. These funds offer investors the opportunity to benefit from the transparent charges, daily dealing and ease of administration that they would expect from a UK-based OEIC product, whilst also enjoying exposure to an asset class that has previously been unavailable to many investors'.

The DEVA 80 & 90 Alpha funds will be launched (listed) in mid-September

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