Following a strong start in Q1 2013, alternative UCITS funds have continued the positive trend in Q2 2013, with assets under management (AUM) growing by 8.3 per cent from EUR96.6bn in March 2013 to EUR104.6bn at the end of Q2, breaking the EUR100bn barrier for the first time, according to Alceda.
Performance across the UCITS fund sector varied significantly, with investors focusing assets on large, blue chip funds. However, several funds launched in Q1 were able to grow their assets over the second quarter. With many investors looking to UCITS vehicles for improved liquidity, the report also reveals daily dealing funds have proved most popular with investors, attracting 83 per cent of assets.
Michael Sanders (pictured), chairman of the board, Alceda Fund Management SA, says: “With continued uncertainty in global markets, investors are looking to Alternative UCITS for diversifying strategies, increased transparency, less volatility in weak markets and improved liquidity. As a result, we have seen the alternative UCITS sector demonstrating strong growth and investor interest, with total assets under management surpassing EUR100bn for the first time. As the sector continues to mature and funds continue to build on their track records, we believe that more investors will continue to enter this market.”
Tracking the Absolute Hedge Global UCITS Index, the sector declined 0.53 per cent in the second quarter, with losses concentrated in June, across a range of funds and strategies. The Market Neutral index performed the strongest with 1.45 per cent growth over the quarter. The Credit Index continued to deliver positive returns, with growth in assets of EUR3.4bn to EUR26.6bn at the end of Q2 and delivered 0.13 per cent returns in the quarter. As the best performing strategy index in Q1, equity long short continued its positive run, growing AUM by 12 per cent and registering 0.38 per cent returns in Q2.
Managed futures, despite registering the first positive quarter in over two years in Q1, had another challenging quarter in Q2. The strategy index was down 3.79 per cent over the quarter with a 14.3 per cent reduction in AUM, including one fund closure. The UCITS vehicle was closed due to concerns regarding commodity exposure and the use of index swaps following last year’s ESMA guidelines.
In an analysis of UCITS fee structures, the report found that 49 per cent of funds in the sector charge a management fee of between 0.50 to 1.00 per cent for institutional share classes. However, these funds control 74 per cent of the overall assets in the sector, showing investors moving assets into low-fee products. Similarly, investors are showing more interest in funds without performance fees. While 62 per cent of alternative UCITS funds have adopted the 20 per cent performance fee model, these funds have only attracted 31 per cent of overall assets.