James Williams, news editor, Hedgeweek

Fixed income proves most popular alternative UCITS strategy in Q3, Vietnam-based Dragon Capital to consider launch of UCITS vehicles…

Vietnam’s Dragon Capital will look to consider converting its Viet Fund Management unit’s five funds, totalling USD120million in AUM, into UCITS-compliant open-ended vehicles when Vietnam authorizes the structure this year reported AsianInvestor this week.

The firm, which hopes to hit the USD50million target for its private equity fund – Indochina Opportunities Fund – by year-end, is looking to branch out as demand for single-country vehicles has waned commented the firm’s CIO Bill Stoops. As a result, the firm will broaden the focus of the fund to cover Cambodia and Laos, and eventually, Myanmar. “We see ourselves as a Southeast Asia frontier markets specialist,” Stoops was quoted as saying.

The decision to look at the UCITS structure with a plan to sell its funds into Europe is a nod towards the regulatory landscape evolving there and a realization that such a regulated fund structure is necessary. The firm does not, however, plan to target retail investors. Rachel Hill, a director at Dragon Capital Markets Europe, told AsianInvestor: “There’s so much regulatory change happening in Europe that you really need a Ucits fund [to sell into certain parts of that market].”   
 
Fixed income strategies were the most popular alternative Ucits funds, with respect to AUM growth in Q3 this year, according to the latest industry data released by Geneva-based Alix Capital, provider of the UCITS Alternative Indices. These strategies, which now account for 33.7 per cent of total assets invested in alternative Ucits funds, enjoyed an 11.4 per cent rise in assets in Q3. They have grown 24.1 per cent year-to-date. In a clear sign that the popularity of alternative Ucits is continuing to grow, the report confirms that total AUM increased by 4 per cent in Q3 to EUR134billion; an impressive rise of 18.5 per cent since the start of 2012.
 
The three biggest single strategy benefactors in 2012 have been Standard Life Investments, GAM and M&G. Their AUM has grown 43.6 per cent, 29 per cent and 63.9 per cent respectively. Q3 also proved to be a strong quarter in terms of new fund launches. A total of 17 new single strategy funds were launched, bringing the total number of new funds in 2012 to 62. The total number of single strategy funds now available to investors is 791.
 
Commenting on the figures, Louis Zanolin, CEO of Alix Capital, said: “Despite the current environment, AUM figures for the alternative UCITS industry continue to rise, with fixed income funds attracting the lion’s share. Inflows have also increased in the UCITS fund of funds market, perhaps signaling a change in attitude towards fund of funds.”
 
Amundi, Europe’s second-largest asset manager with EUR692.9billion in AUM and a pioneer in volatility management, announced this week it had enhanced its fund range with the launch of Amundi Funds Absolute Volatility Arbitrage Plus. The UCITS IV-compliant sub-fund is the latest addition to the Luxembourg-based SICAV, Amundi Funds, which had more than EUR18.3billion in AUM and 66 sub-funds sitting under the umbrella structure as of August 2012.
 
The new sub-fund offers investors diversification and decorrelation to other asset classes and aims to generate annual returns of EONIA plus 4 per cent, over a minimum three-year investment horizon and with a maximum volatility of 8 per cent. As with other arbitrage strategies, the objective of volatility arbitrage is to capitalise on price inefficiencies during times of market uncertainty.
 
Eric Hermitte is fund manager of the new sub-fund and will lead an investment team of nine fund managers. He commented: “Within financial markets, flaws and valuation gaps can be observed and these imperfections form the core of arbitrage strategies. We have a track record of more than ten years in this type of strategy and strive, via the Amundi Funds Absolute Volatility Arbitrage Plus sub-fund, to generate performance by making the most of these market inefficiencies.” The various strategies to be deployed include: equity volatility arbitrage; equity index volatility arbitrage; interest rate volatility arbitrage, and convertible bond volatility arbitrage.
 
Finally, Morgan Stanley this week announced the launch of the MS SLJ Macro UCITS Fund on its FundLogic Alternatives Plc platform, an Irish UCITS umbrella. SLJ Macro Partners is a UK-based asset manager co-founded by Stephen Jen and Fatih Yilmaz. The new fund will give investors the opportunity to invest in a global macro strategy with a large focus on FX markets.
 
David Armstrong, managing director and Global Head of Fund-Linked business at Morgan Stanley, commented: “We are confident that Stephen and Fatih’s impressive experiences and research backgrounds will prove a key element in the success of this new program as it brings together their expertise in deep analysis of macroeconomics and macro policies, along with rigorous quantitative modeling.”
 
Jen, who co-manages the fund with Yilmaz, said he felt the team’s ability to provide an FX overlay in combination with its macro research and advisory services set it apart from others. “Furthermore, it enables us to concentrate on long term directional opportunities that we see in the Foreign Exchange Markets.”
 
Added Yilmaz: “We see our sound risk management processes, augmented by the solid UCITS framework provided by Morgan Stanley - one of the leading providers of regulated alternative strategies - as great appeal to investors wanting to tap into the global macro sub-strategy.”

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