Lyxor Asset Management is one of Europe’s leading asset managers and has been expertly selecting hedge fund strategies since 1998. Lyxor has enjoyed great success since it started launching UCITS funds on its dedicated Alternative UCITS platform at the beginning of 2013.
Over that period, the platform has grown at an average rate of 30 per cent. More specifically, since January 2018, it has enjoyed 49 per cent growth. Total
AUM stands at USD4.1 billion (as of September 2018) and the platform features 13 UCITS funds, nine of which are external managers including the likes of TIG Advisors, Chenavari, Metori, Winton Capital, and Sandler.
“We are proud of the achievements we have made on the platform so far this year,” says Moez Bousarsar (pictured), Deputy-Head of Hedge Fund Selection, Lyxor Asset Management. “Year-to-date, we’ve added over USD1 billion of new investor inflows and our ranking among alternative UCITS platforms has risen to number 3, behind Schroders and Merrill Lynch.”
Merrill Lynch’s USD6.5 billion MLIS platform was sold to Generali in July this year. As other bank platforms retreat, including Morgan Stanley’s USD3.4 billion FundLogic platform, asset managers are stepping up their game. Lyxor has no doubt about the future growth of the alternative UCITS space and is targeting to grow the platform to USD6 billion within the next three years.
“From our perspective, the demand for UCITS remains firm. Our house view is that by 2020 there could be USD100 billion of additional assets flowing into the UCITS space. We hope to capture a portion of that capital but the question is, How?
“It really goes back to our DNA. Lyxor has a long track record of hedge fund selection. After nearly 20 years at the forefront of multi-management, we have established ourselves as privileged partner to some of the biggest names in the alternative management space. Our platform is built on a strong process of onboarding strategies we think could create diversification or present the perfect timing to benefit from where we are in the market cycle.
“The strategies we select on the platform help investors navigate through the market cycle. That is why despite challenging markets and challenging performance in 2018, we believe we have the appropriate strategies to help investors achieve their return goals. If we continue to do so, and we see that additional USD100 billion of industry inflows by 2020, reaching USD6 billion in AUM for the platform seems like a realistic target,” outlines Bousarsar.
He believes growth will be fuelled by demand for diversifying strategies, not only from investors familiar with investing in alternative strategies but also from new types of long-only investors such as private bank clients, mutual funds and asset managers. Alternative UCITS will provide new investors access to diversifying strategies in a liquid, transparent, tax efficient, and regulated format, says Bousarsar.
“We are late in the cycle and our recommendation to investors is to diversify from long beta-type strategies to more absolute return strategies. We are positioned around three key axes: i) favour stock/ bond selection strategies, ii) leverage the global M&A upswing, iii) favour strategies that benefit from rising bond yields. We maintain an Overweight stance on Event-Driven and Merger Arbitrage in particular.”
The platform has just teamed up with Dymon Asia to launch the Lyxor/Dymon Asia Macro fund, a discretionary global macro fund with an Asia focus and plans to add an Emerging Market debt fund before the end of 2018. A third fund in the pipeline is a statistical arbitrage equity market neutral fund, scheduled to launch in Q1 2019.
As the alternative UCITS market continues to mature, some strategies have become commoditised. When this happens, one tends to see a flattening of the AUM curve. Lyxor guards against this by constantly asking itself what it can do differently to support future growth on the platform: looking for niche strategies with differentiating asset classes and geographic exposures and always striving to diversify its clients’ portfolios across all market cycles.
“To drive the future growth, you have to be selective and have a genuine DNA in hedge fund selection,” stresses Bousarsar. “Some 80 per cent of the partnerships on our UCITS platform are with non-EU managers. That has always been the platform philosophy. But along with the manager selection, investors now want a high-quality, broader and integrated service: portfolio management, access to our senior members and fund analysts, comprehensive risk and operational due diligence as well as efficient European distribution and in-depth knowledge of regulatory frameworks across the main European markets.”
