Barclays Capital Fund Solutions (BCFS) is the asset management business of Barclays Capital, specialising in multi-asset investing. Its expert managed quant and fully discretionary fund management teams aim to deliver steady investment returns across all market cycles over the long term, through a focus on downside risk management, flexibility and liquidity.
Ajay Jain, head of portfolio engineering, is responsible for the development of managed quantitative strategies and alpha-generating asset allocation models at BCFS, including the Barclays World Tactical Opportunity (BWTO), a multi-asset absolute return strategy also available in Ucits format.
BWTO uses a tactical asset allocation strategy designed to generate stable uncorrelated returns in all economic scenarios – inflation, deflation, stagflation and hyperinflation – across markets. It invests in multiple markets, trading equities, equity volatility, fixed income, money markets, FX and commodities.
Launched on June 1, 2007, BWTO, which primarily invests in futures, swaps and ETFs, as well as hedging with cash, has returned 3.6 per cent net of fees in euros over the 12 months to the end of January, when the strategy had EUR839m in assets under management.
“Like many of our strategies, a key attribute of BWTO is its level of flexibility,” says head of Swiss and German sales Gil Platteau (pictured). “It is designed to cope with high volatility like we saw last year and focuses on downside protection. Each month we systematically convert a full analysis of macro and technical indicators and dynamically reallocate to appropriate asset classes.”
This flexible approach offers three advantages. It allows the portfolio always to be aligned with underlying market conditions and to quickly reduce risk when markets shift, and it prevents the portfolio from taking positions in any asset classes where fundamental and technical indicators are not aligned with one other.
“All three factors contributed to the strategy’s performance last year,” Platteau says. “We not only preserved capital, we also generated positive returns – 2011 validated the strategy and highlighted its value-add to investors.”
The BCFS systematic process ensures a strictly-defined investment strategy that limits potential for biased investment decisions. By dynamically rebalancing on a monthly basis, the strategy successfully navigated the 2008 financial crisis and 2011’s volatility to generate annualised returns of 8.2 per cent up to January 31.
Another reason for BCFS’s success is its focus on downside protection. “The core belief is that successfully generating long-term returns begins with protecting against the downside,” Jain says. “Our risk management process seeks to anticipate correlation breakdowns rather than react to them and is a key differentiator in the way the fund is run.”
Multiple asset classes are systematically monitored and quantified daily to identify any growing sentiment risk, which would increase the likelihood of a correlation crisis. This process also allows the team to react quickly to market changes and put risk back on when necessary intra-month.
BCFS portfolios are rebalanced at least monthly, preventing any dominant positions developing. Contributors to performance change month by month across all asset classes, which in turn helps deliver uncorrelated returns.
“In the first half of 2011 we were quite bullish on commodities and developed market equities in the BWTO fund,” Jain says. “However, in the second half of the year this reversed and the key contributors were US Treasuries and fixed income.”
Platteau adds: “We’re delighted to have been chosen for this award because it validates our philosophy that a dynamic, flexible investment strategy can benefit investors. It recognises the hard work of the entire asset management division of Barclays Capital.”
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