James Williams, Hedgeweek

Henderson team reduces exposure to emerging market debt… Lyxor Asset Management launches Lyxor/Tiedemann Arbitrage fund…

Lyxor Asset Management this week announced the launch of the Lyxor/Tiedemann Arbitrage Fund, a UCITS-compliant fund designed to give investors access to a pure merger arbitrage strategy, in partnership with hedge fund firm TIG Advisors.

The fund’s investment strategy is to play arbitrage deals from both a long and a short perspective by investing in securities that are subject to special events in North America, Europe, Australia, South America and Asia. The investment team focuses on 0-30 day events within the merger arbitrage process and looks for wide spreads and complex deal opportunities relying on TIG’s deep research capabilities.
 

 
The current macro economic and financial landscape provides a robust environment for global merger arbitrage with:
 

 
• Cash reserves in corporate balance sheets at an extremely high level

• Interest rates at historic lows

• Global banking stabilization

• Complex deals providing significantly better spread opportunities
 

 
Drew Figdor, portfolio manager for the strategy at TIG since 1993, said: “We look for complex mergers where our research can add value and are anticipating an uptick in mega-cap deals driven by the increased availability of funding, both for strategic buyers and private equity.“
 

 
The fund, now passported in six countries, is available on Lyxor’s Alternative UCITS Platform. Investors in the fund will also benefit from the weekly liquidity and independent risk management provided by Lyxor.  
 
Boston-based Loomis Sayles is preparing to launch a UCITS-compliant version of its long/short credit hedge fund, reported FINalternatives. The firm is apparently working with Deutsche Asset & Wealth Management with the aim being to debut the fund on 1 July 2013 on Deutsche Bank’s dbalternatives platform. Jeff Seaver, managing director for the USD1.1billion hedge fund, said that the Luxembourg-domiciled UCITS fund would be managed on “a pari passu basis to the existing process”. He added that the managed account that the firm has been running “has a very low tracking error to the existing strategy”.  
 
A survey conducted by Multifonds has found that over half of respondents believe that the AIFM Directive – due to go live next month – will achieve the same international standard as UCITS. Fifty-nine per cent of respondents, which collectively manage and administer USD13trillio and USD28trillion of assets respectively, said that the AIFMD will become an international standard for distributing alternative investment funds. Convergence between traditional and alternative funds “will have a fundamental impact on the way that managers and administrators service the fund industry,” said Keith Hale, executive vice president for client and business development at Multifonds. Pivotal to that convergence trend appears to be the AIFMD, in Hale’s view, noting that 83 per cent of respondents agreed that convergence will continue.
 
One issue that could stymie widespread adoption of the AIFMD is increased costs. Almost three quarters – 74 per cent – of respondents said they had seen a rise in the implementation costs for AIFMD. Central to this is the cost of depositary liabilities – which custodians will invariably pass on to fund managers through being tasked with safekeeping and monitoring a fund’s assets. The survey found that 41 per cent of respondents expect depositary costs to be in the region of 5 to 25 basis points, although these could rise depending on the complexity of strategy being executed. To cater for non-EU investors, some 77 per cent expect EU managers to consider offshore structures so as to circumvent these liability costs.
 
Luxembourg was the clear favourite to benefit under the AIFMD, with 89 per cent placing it at the top of their list of domiciles. On the potential widespread adoption of the AIFMD, Hale said that “it may take a few iterations of the directive before it goes global as UCITS III did in the 2000s”.
 
Finally, Citywire Global this week reported that Henderson’s Alternative UCITS bond team has reduced exposure to emerging market debt. Kevin Adams, part of a seven-strong investment committee that oversees the EUR579million Henderson HF Total Return Bond fund, said that the fund had become defensively positioned at the end of April in anticipation of a market collapse. This resulted in the team reducing exposure to EM debt from 10 per cent at the end of April to 7 per cent at the end of May.

Adams was quoted as saying: “We have seen an awful lot of money go into emerging markets but we have been concerned that, while there is a lot going in, there is only a small doorway for when they want to get out.” Nevertheless, Adams said there was a chance to look at opportunities that could take the fund’s EM debt exposure past the 10 per cent level. Mexico and Brazil could be potential markets where the team expects to see some exciting opportunities going forward. 

Further reading



Upcoming events

23 hours 59 min from now - New York
23 hours 59 min from now - Toronto
23 hours 59 min from now - Barcelona
1 day 11 hours from now - New York
1 day 23 hours from now - London

Upcoming training

Mon, 29/09/2014 (All day) - London
Thu, 02/10/2014 (All day) - London