Pioneer Alternative Investments has launched the latest version of the successful Momentum AllWeather Fund which closed to new investors in July of this year.
As a continuation of the AllWeather concept with its focus on low volatility investment strategies, Momentum AllWeather Strategies II Master Fund, the new fund, shares the original fund’s structure and investment approach.
Launched in May 1995, Momentum AllWeather Fund was one of the first funds of hedge funds (FoHFs) to focus on low volatility alternative investment strategies at a time when most hedge funds were following an aggressive and volatile investment style. The Federal Reserve’s decision to raise interest rates in 1994 and the consequent financial fallout hurt many hedge funds and was the catalyst for Momentum’s decision to focus on creating a low volatility alternative investment vehicle.
The AllWeather concept was based on the idea of building a fund with consistent and largely predictable returns, mostly undisturbed by (sometimes violent) fluctuations in a particular market or the economy at large. A primarily event driven fund invested in an evolving portfolio of investment strategies, it has stayed true to this investment philosophy in the little over nine years since launch. Over this period the fund has experienced only ten losing months and provided annualised returns of over 9% with exceptionally low volatility of just over 3%.
The fund’s low volatility characteristic is primarily delivered by a strong bias towards event driven strategies, a factor underpinned by the belief that more consistent returns can be delivered by focusing on strategies where the outcome is relatively predictable (distressed debt for example) rather than strategies which are more prone to market events. However although market independent strategies form the fund’s core, the overall balance of the portfolio continuously evolves to reflect economic conditions.
Commenting on the Fund launch, Michael Goldman, Co-CIO, Funds of Hedge Funds, Pioneer Alternative Investments, said: “As a product, Momentum AllWeather Strategies II Master Fund represents the gradual evolution of the original AllWeather idea. The new Fund will utilise the exact same investment approach and fund structure with a large overlap in managers from the original version. Like AllWeather, the fund will contain around 20 funds, an approach we have always favoured and which academic studies have since shown to be the optimum portfolio for diversification benefit. I am confident that Momentum AllWeather Strategies II Master Fund will build on the overwhelming success of the AllWeather approach and continue to generate absolute returns within a consistently low volatility framework, largely undeterred by market events.”
Pioneer Investments’ hedge fund business has grown rapidly in the last two years and a primary driver in this success has been the Momentum acquisition in late 2002, up until then the Group’s focus had been on single strategy hedge funds. A key component in the expansion has been the success of the AllWeather fund and overall demand for the Momentum fund range across Pioneer Investments’ global distribution network. Demand has been such that assets into the AllWeather fund range increased threefold since the end of 2002 and now stand at just over USD 2 billion (end July 2004).
The product has proved popular with both the high net worth segment and more recently with institutions.
According to Nigel Meir, Head of Institutional Sales, UK and Scandinavia, Pioneer Alternative Investments: “Institutions are increasingly starting to look at FoHF’s for their diversification benefits and for efficient portfolio management, a trend that is set to continue. We have already had some success on the instiutional mandate level and our edge here has been derived from AllWeather’s long and impressive track record and the strength and depth of the due diligence and investment process.”
Background Note: Pioneer Investments is a global investment management group (the “Group”) with over EUR125 billion of assets under management as at 31 August 2004. It provides a wide range of investment solutions including mutual funds, alternative investments and structured products to clients that include institutions, corporations, intermediaries and private investors around the world.Â
The range of single, multi strategy and multi manager hedge funds are provided by Pioneer Alternative Investments which has its main operations in Milan and New York, Dublin being the investment centre. Pioneer Alternative Investments (PAI) was formed in 1998 as part of Pioneer Investments’ aggressive growth strategy, recognising the increasing importance of the alternative investments industry. Since then PAI has built up a comprehensive range of alternative investment products which include single strategy, multi-strategy and funds of hedge funds. PAI had total assets under management in excess of EUR 3.8 billion as at end of August 2004.
Pioneer Investments and Pioneer Alternative Investments are trading names of the Pioneer Global Asset Management S.p.A. group of companies (PGAM). PGAM is a wholly owned subsidiary of UniCredito Italiano S.p.A.
