Fri, 25/05/2007 - 08:22
State Street Global Advisors is extending its 130/30 investment product range with the launch of UK Alpha Edge, the latest in a series of investment products employing SSgA's Edge methodology that seeks to combine the best of long-only and long/short approaches.
The strategies take short positions up to 30 per cent, which in turn funds an additional 30 per cent of long positions, maintaining net market exposure at 100 per cent. The Global Alpha Edge strategy launched last March was one of the first strategies to use the 130/30 investment methodology in a Ucits III-compliant structure.
SSgA says the 130/30 investment methodology reflects a growing recognition that loosening the long-only constraint on active strategies is one of the most cost-effective ways to increase portfolio efficiency. While maintaining 100 percent net market exposure, allowing a judicious level of shorting can give a portfolio a better risk-return ratio.
UK Alpha Edge is designed for investors seeking better performance from their equity portfolios, with the objective of outperforming the FTSE All-Share Index by 4 percent per year over rolling three-year periods. SSgA says the strategy provides an effective solution to investors looking for alpha-generating products that offer a risk level between those of long-only and full long/short funds.
Kanesh Lakhani, managing director of SSgA in the UK, says: 'The key advantage of the 130/30 approach is that it allows managers to express both their negative and positive views to enhance returns while controlling risk. This approach is at the forefront of modern fund management practice and we expect this strategy to be highly attractive to institutional investors.'
According to SSgA, the 130/30 methodology is a logical extension of quantitative investment management techniques, and takes advantage of all of the information available on the securities in the investible universe.
Securities are selected based on a multi-factor financial analysis, such as free cashflow to price ratio, distribution rate and earnings forecasts, with a view toward building a well-diversified portfolio that is neutral in terms of style, capitalisation and sector. SSgA says its investment discipline and risk controlled approach allow the strategy to maintain a tracking error of 4 to 5 per cent against its benchmark, the FTSE All Share Index.
State Street Global Advisors, the investment management arm of State Street Corporation, has investment centres in Boston, Hong Kong, London, Milan, Montreal, Munich, Paris, Singapore, Sydney, Tokyo and Zurich, as well as offices in 25 other cities worldwide, and had USD1.8trn in assets under management at the end of March.
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