With equity markets continuing their rally into Q3 2013, the demand for alternative UCITS strategies has continued, according to the Alceda Quarterly UCITS Review.
Tracking the Absolute Hedge Alternative UCITS Index, which encompasses 454 funds, assets under management reached a total of EUR154.4bn, an increase in AUM of 2.6 per cent on the previous quarter.
Following a challenging Q2 where the sector declined 0.53 per cent, alternative UCITS strategies rebounded in Q3 2013 advancing 1.09 per cent and an overall 3.12 per cent year to date.
With the growth in AUM, the sector also saw an increasing range of funds made available with the launch of seven new funds in the quarter. While the new fund launches remain small, the UCITS review reveals that new funds are increasingly gaining traction within their first year, showing more demand and interest in the alternative UCITS space.
Stronger equity markets allowed the AH Equity Long Short Index to be the best performing strategy in the quarter, growing 2.98 per cent, also making it the top performing strategy year to date (+7.68 per cent). Similarly, equity long short strategies achieved returns of 6.19 per cent in 2012. Three of the new funds in the quarter were in the Equity Long Short Index.
European focused strategies dominate the equity long short space both in terms of number of funds (60) and assets under management (c.EUR6.9bn). In contrast, global strategies have the highest average fund size at EUR144m, following closely by UK strategies at EUR142. European strategies, with an average fund size of EUR132m, compares well to Asia and US funds who have an average of EUR109m and EUR102m respectively.
In the stronger equity driven environment and political uncertainty in key markets, macro and trend strategies continue to face challenges in the Q3 2013. FX and managed futures strategies were hard hit and declined 3.29 per cent and 2.42 per cent in the quarter respectively, making managed futures the worst performing strategy year to date. Both strategies were also hit by declining assets with a reduction in AUM of 10 per cent for FX strategies and 3.1 per cent for managed futures strategies.
Michael Sanders (pictured), chairman of the board, Alceda Fund Management, says: “Investors showing a growing risk appetite coupled with more confidence in equity markets has driven the demand in and performance of equity related strategies. With equity long short as the strongest performing category in the quarter and over the year, it appears investors are looking for higher returns and diversification through alpha. With the strong performance of equity related strategies in 2012 and in the year to date, it is unsurprising we are seeing strong investor demand in the strategy and we would expect this to continue in Q4 2013.
“With new fund launches, continued AUM growth and a rebound in sector performance over the quarter, alternative UCITS continue to deliver and meet investor needs for portfolio diversification, and we expect to see more investors continuing to enter the market.”