Pioneer Alternative Investments has launched Pioneer Absolute Return Equity, a Ucits III fund that captures the returns of an underlying hedge fund strategy by entering into a total return
Pioneer Alternative Investments has launched Pioneer Absolute Return Equity, a Ucits III fund that captures the returns of an underlying hedge fund strategy by entering into a total return swap transaction with HVB Structured Invest, a fellow member of Italy’s UniCredito group.
The underlying fund follows a predominantly European equity long/short strategy based on a fundamental bottom-up rather than quantitative approach, and aims to make positive absolute returns with minimal market correlation with a target return of Euribor plus 250 to 300 basis points. Ucits III funds are not allowed to short stock directly, but they can achieve the same result using derivatives.
Riccardo Cavo, head of European long short strategies, and Andrea Buda, manager of the Pioneer Long Short European Equity Fund, are responsible for the underlying strategy at Pioneer Alternative Investments and have proven track records within the long/short arena.
‘We know there is a growing demand for absolute return or outcome-oriented investment products in all the client segments,’ says the firm’s chief executive, Alberto La Rocca. ‘Although there are a few similar products on the market, some are offered by long-only houses.
‘We have a clear advantage by being an experienced and successful hedge fund manager. Others have a quantitative style, which has particular limitations. We believe a fundamental approach, reliant on the skill of the manager to deliver the target returns within a risk-controlled framework, is much more appropriate for this structure.’
Luca Mengoni, chief investment officer for single manager investments, argues that the fund is a natural progression for Pioneer Alternative Investments. ‘We have always worked to high standards of liquidity, transparency and risk management in our traditional hedge fund strategies.’ he says.
‘When Ucits III provisions were introduced giving the flexibility to develop [products such as] Pioneer Absolute Return Equity, it was a natural evolution to accept all the conditions, as they were already part of our investment culture. For many other hedge fund managers it will not be so easy as they have constraints that prevent them operating to Ucits III standards.
‘From an investment perspective, we are relying on delivering alpha and not beta, so we are not seeking to exploit asset classes but extracting alpha without chasing beta. The skill of the human contribution of our fund managers is the platform for our success, not the workings of a machine.’
Pioneer Absolute Return Equity is currently available for public distribution in Italy and Spain, and it will probably be registered in other countries. ‘As a business we have a strong tradition of consistency and innovation and this new product is proof of those characteristics,’ La Rocca says.
‘[We provide] consistency in the reliable investment returns we are aiming to deliver to our clients and innovation in the construction of this offering and the partnership with HVB Structured Invest to create an effective solution. We are seeing a lot of interest in this fund with assets already reaching EUR200m, so we will be keeping a close eye on capacity for further distribution.’
Pioneer Investments had a total of EUR203.6bn in assets under management at the end of January in mutual funds and structured products on behalf of clients that include institutions, corporations, intermediaries and private investors worldwide.
The group’s hedge fund business, Pioneer Alternative Investments, had total assets under management of EUR6.2bn in single strategy funds and funds of hedge funds at the end of January. The business has its main operations in London, Milan and New York and its investment centre in Dublin.
