State Street Global Advisors, the investment management arm of State Street Corporation, has been appointed to manage a GBP165m global equity 130/30 mandate by the Asda Group Pension Fund,
State Street Global Advisors, the investment management arm of State Street Corporation, has been appointed to manage a GBP165m global equity 130/30 mandate by the Asda Group Pension Fund, to be invested in SSgA’s new equity investment product, Global Alpha Edge.
According to State Street, Global Alpha Edge is one of the first Ucits III-compliant products to incorporate a 130/30 investment methodology, and is planned as the first in a range of investment products using the firm’s Edge 130/30 methodology that SSgA plans to roll out this year to UK and European institutional investors.
‘UK pension funds continue to move toward global equity strategies and are currently focusing on increasing the alpha from their equity portfolios efficiently within a risk budgeting framework,’ says Kanesh Lakhani, a senior managing director for SSgA in the UK.
‘We are delighted with this investment from Asda, which demonstrates the strong interest we expect this strategy to generate from UK pension funds. Global Alpha Edge uses a disciplined investment process to deliver alpha with an efficient control on risk, providing managers with the freedom to achieve consistent outperformance.’
Says Asda pensions manager Steve Jones: ‘The appeal of the product was the opportunity for enhanced alpha relative to long-only mandates through short positions while having a cap on total liability.’
According to State Street, Global Alpha Edge is designed for investors seeking to make their alpha seeking portfolios work harder. The Edge process is an extension of quantitative investment management techniques, capitalising upon all of the information available on the securities in the investible universe.
With about 350 investment positions selected from a universe of nearly 2,000 international stocks, the Global Alpha Edge strategy provides a representative exposure to all international markets.
Securities are selected based on a multi-factor financial analysis, such as the free cash flow to price ratio, distribution rate and earnings forecasts, with a view toward building a well-diversified portfolio that is neutral in terms of style, capitalisation, sector and region. SSgA’s investment discipline and risk-controlled approach allows the strategy to maintain a four to five per cent tracking error against its benchmark, the MSCI World Index.
The strategy is designed to provide an efficient solution for investors seeking alpha-generating products offering a risk level between those of long-only and full long/short funds. While limiting exposure to 100 per cent, allowing a judicious level of shorting improves the portfolio’s efficiency by providing a better risk-return ratio. The strategy aims to achieve consistent outperformance of four to five per cent over a three-year market cycle.
With USD1.7trn in assets under management at the end of last year, State Street Global Advisors has investment centres in Boston, Hong Kong, London, Milan, Montreal, Munich, Paris, Singapore, Sydney, Tokyo and Zurich, and offices in 25 cities worldwide.
