Schroders is to add another externally-managed fund to its Schroder GAIA platform, Schroder GAIA Avoca Credit – a fundamental credit long short strategy scheduled to launch in November 2013.
Schroder GAIA (Global Alternative Investor Access) is Schroders’ alternative UCITS platform designed to offer investors access to hedge fund strategies in the liquid, transparent and regulated UCITS format.
The fund will be managed by Simon Thorp and James Sclater from Avoca Capital Management, who have run this strategy for 13 years. Avoca’s existing UCITS fund, the Avoca Credit Absolute Return Fund, will merge into Schroder GAIA Avoca Credit upon launch.
The fund will be benchmark unconstrained aiming to deliver an annualised return of seven to 10 per cent net of fees. The fund will focus predominantly on European corporate credits and financials with smaller allocations globally, including to emerging markets.
Thorp and Avoca’s credit long/short team will use the same fundamentally driven research process employed in Avoca’s credit long/short strategy, which has produced an annualised net return of 9.8 per cent and delivered positive annual returns every year since 2002. This process aims to identify and exploit mis-priced improving and deteriorating credits on the long and short side respectively. The fund will invest in the full credit spectrum using instruments such as corporate bonds, CDS, credit indices, investment grade and high yield index options and sovereign debt.
Thorp says: “We are very pleased to be partnering with Schroders, which has established one of the leading alternative UCITS platforms. Having successfully managed this strategy for over a decade, we are excited to be able to offer it to a wider audience via the Schroder GAIA distribution network. We are currently seeing a strong investment case and wealth of alpha opportunities within the long/short credit space as we enter the mature part of the credit cycle and an upturn in the interest rate cycle. We look forward to contributing to the diversification of Schroder GAIA’s offering.”
Eric Bertrand, director of Schroder GAIA, says: “We are constantly on the lookout for high-quality hedge fund managers to join our Schroder GAIA platform and believe that Avoca’s credit long/short strategy will be a complementary addition. This partnership provides an exciting opportunity to combine Schroders’ distribution framework and extensive resources with Avoca’s considerable experience and expertise in managing credit long short strategies.”
The Schroder GAIA platform was launched in November 2009 and has now reached EUR1.8bn in assets under management. GAIA offers access to liquid alternative investment strategies with moderate to low correlations to mainstream market returns within a Luxembourg mutual fund format subject to the ‘gold standard’ UCITS regulations.
Schroders currently has five funds on the platform, three managed by external hedge fund managers (Schroder GAIA Egerton Equity, Schroder GAIA CQS Credit and Schroder GAIA Sirios US Equity) and two managed internally (Schroder GAIA QEP Global Absolute and Schroder GAIA Global Macro Bond).