Neptune Investment Management is to launch the Neptune Global Long/Short Sector Fund on 1 November 2011.
Neptune is known for the proprietary global sector research process that is central to the management of all its funds. Based on this research, Neptune’s range of long-only equity funds have always reflected the company’s in-house sector calls by being overweight sectors expected to outperform and underweight, or even zero weight, sectors with a poor outlook. Through the use of wider UCITS powers, the Global Long/Short Sector Fund is able to leverage this sector research to its full potential; shorting sectors where the in-house view is bearish and adding additional gearing on sectors anticipated to outperform.
Richard Green, Deputy Managing Director says: “Neptune has a proven track record in managing global equities. Our multi-award winning Global Equity Fund is nearing its 10th anniversary under the stewardship of Robin Geffen, having generated considerable outperformance over this period. The Neptune Global Long/Short Sector Fund is an extension to our global equities strategy and product range, allowing us to harness the global sector views of the investment team alongside Robin Geffen’s excellent asset allocation experience. This is not a change in direction for Neptune, but rather a natural development to leverage our existing intellectual capital to actively identify sectors we believe are due to under or over perform.”
Each of the Global Industry Classification Standard sectors will be represented by a basket of 20-50 large and liquid stocks that are correlated with global sector indices. The exposure of the new Fund to each sector basket will be determined by the positions of Neptune’s in-house global sector matrix and its long-only Global Equity Fund sector weightings. The aim is to have an average exposure of 15% to emerging markets in each sector to reflect the global GDP balance.
The fund will be co-managed by Robin Geffen, manager of the AAA OBSR-rated Neptune Global Equity Fund, and Ted Alexander, Fund Manager of the Neptune UK Equity Fund and co-manager with Robin on other products.
“As far as we are aware, the Neptune Global Long/Short Sector Fund is the first fund to use basket swaps at a global sector level," says Alexander. "This is not a hedge fund, a 130/30 Fund, an absolute return fund or a vehicle following some kind of highly volatile leveraged strategy. This product is a transparent UCITS fund that purely uses the wider powers to go long or short on sectors. To short/long sectors is a natural extension to what we already do – we already set targets for sector exposure as part of our core research. Now, however, we have the ability to take these target positions and use them to set long/short targets, rather than overweight/underweight.”
He adds: “We are not shorting individual stocks, and therefore the shorting risk is much lower than for long/short stock funds. By shorting sectors, which are diversified to eliminate idiosyncratic or stock-specific risks, the Fund should have a lower volatility and potential value at risk.”
The Neptune Global Long/Short Sector Fund is a directional fund, with the ability to go net short, or above 100% long. Under normal conditions the Fund is expected to be c.150% gross / 120% net. The net long/short positions will be determined by how bullish the Neptune house view is on the market. A test portfolio has been run by Ted Alexander since June 2010. Since then the test portfolio has generated outperformance over its benchmark, the MSCI World Index; both sector selection and leverage are shown to have contributed to this outperformance.
