Allianz Global Investors has expanded its liquid alternatives platform with the launch of the Allianz Structured Return fund, an absolute return strategy designed to pursue positive returns independent of market conditions, while managing downside risk.
The new fund is managed by portfolio manager Stephen Bond-Nelson, alongside Greg Tournant, chief investment officer for US structured products at AllianzGI.
The investment team, based in New York, has extensive experience investing in equity index option strategies.
The investment platform, launched in September 2005, provides absolute return and return-enhancement solutions for its clients, and as of 31 July, the team manages USD5.3 billion in option portfolios.
Deborah Zurkow (pictured), head of alternatives at AllianzGI, says: “The strategy aims to deliver what clients need most: reliable outcomes for taking bond-like risk. After successfully introducing the Structured Alpha strategy in Europe, we are very pleased to offer our clients another strategy that will help them achieve their investment goals. In a period marked by sustained low interest rates and market volatility, the ability to generate positive returns from largely uncorrelated risk factors will be a key driver for further growth of alternatives strategies.”
A recent paper published by AllianzGI shows that the use of alternative investments is now a global phenomenon, with nearly three in four institutional investors around the world investing in alternative assets.
AllianzGI’s research also shows that diversification is the most important reason for institutional investors allocating to alternatives (30 per cent), followed by low correlation to other asset classes (25 per cent) and their ability to generate higher returns than bonds or equities (14 per cent). Asked about liquid alternatives, three in five (57 per cent) investors believe that in the current market environment they play an important part in portfolio construction, and nearly as many (56 per cent) agree that they provide attractive risk-adjusted returns relative to traditional investments and asset classes.
With daily liquidity and different share classes available for institutional and retail investors, the fund offers a large client base the accessibility to an attractive market neutral return profile. The fund’s core position consists of short in-the-money call options on the S&P 500 Index, covered by a long passive position in the index. Other option positions are also constructed to mitigate risk and for portfolio diversification. The fund seeks to benefit from the return-generating benefits of selling options while maintaining the ability to navigate as wide a range of potential market outcomes as possible.
Bond-Nelson, says: “We use a combination of equity index call and put options at carefully selected strike and duration profiles, with the objective of generating consistent, positive, single-digit returns regardless of the market environment. From a risk perspective, the fund’s risk profile is comparable to that of a fixed-income portfolio – yet it does not have the associated credit, duration, or interest rate risk.”
The team has been managing the Structured Return strategy in the US since December 2012.
Alternatives is one of the four pillars in AllianzGI’s global investment platform, alongside equities, fixed income and multi-asset investments. AllianzGI’s alternative investment strategies include equity long/short, merger arbitrage, options, commodities, volatility, global macro, absolute return bonds, private debt, infrastructure debt, and infrastructure equity strategies. AllianzGI manages EUR14 billion in liquid and illiquid alternatives as of 30 June.
