Old Mutual Global Investors (OMGI), part of Old Mutual Wealth, is to launch the Old Mutual Style Premia Absolute Return Fund (STAR) at the beginning of December.
The Ireland-domiciled UCITS fund will be the latest addition to the business’s suite of systematic liquid alternatives products, addressing demand from institutional investors for portfolio-diversifying products that invest in strategies with uncorrelated returns to traditional markets.
OMGI currently manages GBP7 billion in hedge fund strategies.
STAR will have a volatility target of 8 per cent and aims to deliver positive total returns on a rolling 12 month basis, uncorrelated to bond and equity markets.
The strategy seeks to capture returns via exposure to a range of systematic investment styles, or style premia, generating long-term results across markets and asset classes. The core underlying styles are value, quality, momentum and carry, across equities, fixed income and currency asset classes.
In addition STAR also uses OMGI’s proprietary statistical arbitrage strategy, seeking to provide additional diversification benefits and downside protection during ‘risk-off’ environments.
The inclusion of this functionality is a significant differentiator to existing products, as its returns can exhibit low correlation to other style premia during drawdown markets.
The fund’s lead manager, Leif Cussen (pictured), has worked on OMGI’s systematic alternative products since joining the business in 2005, including co-developing OMGI’s statistical arbitrage strategy. Cussen will be supported on the fund by Paul Simpson and John Dow as portfolio managers, both of whom have significant experience in developing and managing liquid alternatives products.
In addition to the management team, a style premia investment committee will provide an additional level of support, oversight and governance. This will help ensure that the fund remains in line with customer expectations.
STAR is a more cost-effective way for investors to access a liquid alternative strategy than traditional hedge funds, which are usually subject to higher management fees.
OMGI are offering early investors access to a founder share class, with a management fee option of 0.50 per cent, or a performance fee option of 0.20 per cent plus 10 per cent over a cash hurdle, available. This offer is open to institutional investors for the first USD200 million of capacity.
Cussen, says: “STAR is designed to meet a growing demand for cost-effective systematic strategies. The fund gives investors access to the diversifying benefits of four core systematic styles across multiple asset classes. In addition, it utilises our proven proprietary statistical arbitrage capability to further enhance diversification and mitigate crowding risks typically associated with style premia exposures.”
Craig Stevenson, chair, style premia investment committee, adds: “STAR is designed to have a very low correlation to traditional assets. We believe the strategy will be a strong diversifier for market driven exposures in client’s portfolios. Further, given its long/short orientation, we see the strategy as a complement to other sources of alpha generation, but at a significantly reduced cost, compared to most hedge fund strategies.
“Old Mutual Global Investors has a strong heritage in managing low correlation alternatives, having launched its first quantitative equity market neutral hedge fund in December 2001. Using our significant experience in this space, we continue to develop innovative products for clients looking to navigate increasingly volatile global markets.”
