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James Williams, news editor, Hedgeweek

IFIA opens Hong Kong office, alternative UCITS funds falter again, and Ignis AM prepares to launch bond fund

Alternative UCITS funds continued to pare back gains made in the first two months of the year. Alix Capital’s UCITS Alternative Index Global fell 0.47 per cent in April leaving it up 1.27 per cent YTD. This follows similar losses of 0.49 per cent in March. Aside from CTA strategies, which ended the month flat, Volatility strategies were the only winners in a tough month performance-wise, gaining a modest 0.37 per cent to leave them up 0.70 per cent for the year. Although losses, across the board, were fairly minor the primary laggard was the Fund of Funds Index, falling 0.75 per cent to leave it down 0.39 per cent for the first third of 2012. Macro and Event-Driven strategies fared little better, recording losses of 0.73 per cent and 0.71 per cent respectively. Emerging Markets, down 0.33 per cent in April, remains the most successful strategy in 2012 with YTD gains of 4.09 per cent, followed by Fixed Income (1.98 per cent) and Long/Short Equity (1.87 per cent). The UAIX series of single strategy indices also recorded losses last month, most notably UAIX Long/Short Equity which fell 2.12 per cent. However, YTD these strategies are in better shape: at the bottom of the range is UAIX CTA (1.75 per cent), with UAIX Volatility leading the way, up 4.13 per cent YTD.          

Sticking with Alix Capital, Geneva-based firm this week published its latest quarterly research on the alternative UCITS industry, its most notable finding being that total AUM has grown by 375 per cent in the last three years: a clear endorsement that investors value the improved liquidity and transparency provided by these regulated vehicles. The report was based on information on 764 single manager “newcits” funds and 76 multi-manager funds. Between March 2009 and March 2011, the report finds that total AUM catapulted from EUR32billion to EUR120billion. In the first quarter of 2012, assets grew 6.2 per cent from EUR113billion to EUR120billion with investor inflows accounting for around three quarters of the growth and 28 per cent from fund performance. Other key findings in the report included: Fixed income remains the largest single strategy with approximately 32 per cent of total assets; 50 per cent of launches in Q1 2012 were long/short equity funds, and two thirds of those launches chose to domicile in Luxembourg. The report also found that the three largest asset managers were Standard Life Investments, BNY Mellon and GAM: between them they hold around EUR30billion or 24 per cent of total industry assets. Alix Capital CEO, Louis Zanolin, commented: “Investors still want to allocate to alternatives in order to add alpha to their portfolios, but are looking for alternatives to offshore funds.”  

In other news, the Irish Times reported this week that the Irish Funds Industry Association (IFIA) is opening an office in Hong Kong to facilitate the growing number of local managers looking to set up funds in Ireland. Dublin is well known to Asian managers thanks to its two-decade reputation as Europe’s leading alternative funds domicile. IFIA currently supports the distribution of Dublin-domiciled UCITS to investors in more than 70 countries. Conor O’Mara, chairman of the Irish Chamber of Commerce (ICC) in Hong Kong will head up the new office in a joint initiative between the chamber and IFIA. Said O’Mara: “The ICC looks forward to helping position Ireland as the offshore centre of choice, as China and Hong Kong internationalises its front- and back-end financial operations over the coming years. A HK-Ireland partnership in finance should prove a win-win scenario for the most open economies in Asia and Europe respectively.”      

Finally, Ignis Asset Management is preparing to launch a global absolute return bond fund for one of its leading managers reported Citywire Global. The Lux-domiciled Ignis Absolute Credit fund is due to launch this summer subject to regulatory approval and will be managed by Chris Bowie, the firm’s head of credit. This marks Bowie’s first foray into the world of alternative UCITS. Bowie said the firm believed the timing of the launch was “pertinent” given the headwinds facing traditional long-only credit investments. To that end, the new fund will invest globally in investment grade and high yield debt securities through liquid credit default swaps – in essence insurance contracts on the underlying instruments – and will look for relative value opportunities by exploiting price differentials via pairs trading (going long and short on securities in the same sector). “Eurozone weakness, low bank creditworthiness, poor economic data and inflationary pressures are real concerns, and at the very least we are forecasting a prolonged period of volatility for credit markets,” said Bowie. “Given this backdrop, I, and other members of the team, will be personally investing in the fund from launch. We believe the future is in the absolute return space and we think credit is the next one to exploit.”  

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