James Williams, Hedgeweek

Alix Capital creates fixed income index for Aurelys SA… China’s interbank bond market opens up for UCITS asset managers…

Schroders has confirmed the launch of a new externally-managed fund on its GAIA platform – Schroder Paulson Merger Arbitrge, subject to regulatory approval. The UCITS fund will be based on the fundamental merger arbitrage hedge fund run by well-known hedge fund manager John Paulson of Paulson & Co. A minimum 85 per cent overlap between the Schroder GAIA fund and the Paulson International Limited fund is expected.

The fund is benchmark unconstrained and will target an annualised return of 8-10 per cent net of fees, with expected volatility of 6-8 per cent.  The Fund can invest globally in equity, equity related and debt securities of companies and the strategy focuses on high quality, larger spread deals, which gears the portfolio towards transactions with competing higher bid probability as well as focusing on unique deal structures.  In particular, the team invests in complex merger related opportunities which offer higher potential alpha than “plain vanilla spread” deals typically used by other merger arbitrage managers.

John Paulson said: “We are very pleased to be partnering with Schroders and look forward to being able to offer our merger arbitrage capabilities to a wider audience via the strength of the Schroder GAIA distribution network.”

Eric Bertrand, Director of GAIA platform, added: “We are constantly on the lookout for high-quality hedge fund managers to join our Schroder GAIA funds. John Paulson brings one of the longest, most successful, track records in the merger arbitrage industry producing strong risk adjusted returns in his flagship fund, which has only ever had two down years since inception in 1996.”

Following the launch there will be seven funds on the platform, four managed by external hedge fund managers (Schroder GAIA Egerton Equity, Schroder GAIA Sirios US Equity, Schroder GAIA Avoca Credit and the soon to be added Schroder GAIA Paulson Merger Arbitrage) and three managed internally (Schroder GAIA Cat Bond, Schroder GAIA QEP Global Absolute and Schroder GAIA Global Macro Bond).

A new route to investing in China’s markets has opened up for asset managers. The Luxembourg regulator, the CSSF, has confirmed that it will accept investments into the Chinese Interbank Bond Market (CIBM) as fulfilling the requirements of UCITS for regulated markets. Those managers who wish to avail of this new route will, however, only be able to do so under the Renminbi Qualified Foreign Institutional Investor (RQFII) quota scheme; typically done so in partnership with Mainland Chinese asset management firms, who, in turn, are keen to attract foreign institutional assets. UCITS-compliant vehicles will be allowed to invest up to 100 per cent of their net assets in the CIBM.
 
Artemis Investment Management LLP this week announced the proposed launch of a new fund, the Artemis Pan-European Absolute Return Fund, subject to regulatory approval.
 
The Artemis Pan-European Absolute Return Fund will be managed jointly by Tim Steer and Paul Casson, and is based on the Artemis Pan-European Hedge Fund strategy (formerly Artemis UK Hedge Fund), a Cayman-domiciled managed by Steer since 2009.
 
Both Steer and Casson have extensive experience of investing in UK and continental European stocks. They use a fundamental bottom-up approach to stock analysis, coupled with a proprietary screening tool. The fund is expected to start trading in Q3 2014 and will initially be offered in two Sterling share classes. Artemis said that multi-currency share classes should become available in Q4 2014.
 
Commenting on the launch, Richard Pursglove, Artemis’ Head of Retail said: “We are delighted to bring this strategy to a wider audience. We are doing so in a UCITS fund for the first time, and in a sector that continues to be popular with our clients.”
 
Alix Capital, the provider of the UCITS Alternatives Index (UAI) family of indices, has been selected by Aurelys SA, a leading Geneva and Monaco-based structured product adviser, to create and manage a new index of UCITS absolute return fixed income funds.
 
Named Aurelys UAIX Fixed Income Index, the new Index’s goal is to provide a diversified allocation to UCITS fixed income funds, which follow an absolute return investment approach. The Index is composed of eight equally weighted funds offering daily liquidity and which have at least EUR100mn in assets under management. Its construction is based on Alix Enhanced Index Optimizer, Alix Capital’s proprietary methodology. Aurelys is expected to use the new index to create investment products for its clients.
 
Louis Zanoli, the CEO of Alix Capital, said that fixed income funds are the largest by total assets, with close to 40 per cent “of all UCITS absolute return fund’s [sic] assets. It is also among the fastest growing as more and more investors are increasing their allocation to absolute return versus long-only funds.”
 
Marc Diem, Strategist at Aurelys, added: “In the current environment characterized by historical low interest and inflation rates, our investors are looking for solutions for their fixed income allocation. A diversified portfolio of absolute return fixed income funds such as the Aurelys UAIX Fixed Income Index is, in our view, the best answer to them as it should produce positive performance even if interest rates and inflation increase.”

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