Axa Investment Management has set a target of attracting around USD2.5bn in new investment into its fund of hedge funds products this year as it opens its two commingled funds up to invest
Axa Investment Management has set a target of attracting around USD2.5bn in new investment into its fund of hedge funds products this year as it opens its two commingled funds up to investors from outside the Axa group, according to global head of funds of hedge funds Christoph Manser.
After three years of building a track record in the fund of funds area, Axa IM’s 27-strong team manages assets of some USD4.7bn, of which 90 per cent is managed on behalf of Axa group companies. However, Manser says the team is now aiming to boost assets in the longer term to more than USD10bn, of which close to 50 per cent would come from third-party clients.
Axa IM’s flagship fund of hedge funds is Axa Alternative Premium, which achieved a return of 13.78 per cent last year and an annualised 9.4 per cent over its two-and-a-half-year lifetime, although it is down around 1 per cent so far this year after an estimated decline of 2.8 per cent in March. The fund of funds team targets a return of 500 basis points above one- to three-month Libor or Euribor by investing in a diversified portfolio of between 30 and 40 underlying managers.
The group also manages a French-domiciled commingled for domestic institutional investors that are not allowed to invest in the offshore Alternative Premium fund, an Irish-domiciled unit trust, and for individual investors who access the fund through private banks and unit-linked life insurance products.
Manser says that to date the team has succeeded in its aim to preserve capital in falling markets as well as to participate in a significant degree of market upside, according to its performance over a period between the launch of the Alternative Premium in October 2005 and the end of February this year, also encompassing back-testing with the launch portfolio from January 2003.
Over that period, the strategy returned 86.8 per cent during the positive months of the MSCI World Cumulative Return index, equivalent to 46.3 per cent of the upside, but during negative months when the MSCI World index lost 35.9 per cent, the Alternative Premium strategy achieved a positive gain of 5.1 per cent.
The team believes that current market conditions offer good opportunities for funds of hedge funds that are particularly not dependent on equity market performance as long as managers pick the right strategies.
At present the Axa IM team is increasing the weighting – within restricted parameters – of strategies including global macro managers and managed futures. Between the beginning of July and the end of February the Alternative Premium strategy returned 6.2 per cent, compared with just 1.49 per cent for the HFRI Fund of Hedge Funds Diversified index
Says Manser: ‘There are still ample opportunities to make positive returns through hedge funds at present, but it is important to seek out strategies which can take advantage of higher volatility and higher dispersion and can cope with the lack of liquidity in many financial markets.’
Manser’s colleague Aarnout Snouck adds that third-party investors will benefit from investing alongside the Axa group because as a major institutional investor it has access to leading hedge fund managers that may be available to other funds of funds, as well as the long-term of the Axa insurance investors, and access to the research and portfolio management for a leading European financial group.
