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EFAMA and SWIFT release new report on evolution of automation rates of cross-border funds… BlueBay Asset Management launches credit UCITS…

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BlueBay Asset Management LLP announced this week the launch of the BlueBay Total Return Credit Fund, providing investors with exposure to sub-investment grade credit through the credit cycle.

Mark Poole, Chief Investment Officer, commented: “We have developed the product to meet investor demand for a more flexible approach to credit markets that is not benchmark driven, and allows active shifts between areas of the market in a timely fashion.”

The Fund aims to achieve a total return of 5 to 10 per cent per annum over the credit cycle. Sources of return are broad based, with alpha achieved via security selection, asset allocation, asset class beta and, in periods of maximum uncertainty, macro/tail hedging. The Luxembourg-domiciled UCITS fund is benchmark unconstrained and allocates between high yield and loans, emerging market debt and convertibles. 

“We believe the fund fits neatly into existing portfolios enabling investors to access a product that can outperform government bonds, but without inherent equity risk. Our active fixed income management style at the sub-asset class level provides a strong competitive edge,” said Poole. The fund will be managed by BlueBay’s Asset Allocation Committee, which comprises a team of six of BlueBay’s most experienced credit experts with an average investment experience of 19 years. 

“The natural downside protection afforded by higher yielding asset classes, combined with our unique view of risk and proven track record in asset allocation, means we can create a very attractive risk return proposition,” added Poole.

This week the European Fund and Asset Management Association (EFAMA) published a new report in collaboration with SWIFT on the evolution of automation and standardization rates of fund orders received by transfer agents in the cross-border fund centres of Luxembourg and Ireland in the first half of 2013. The report confirms that the total volume of orders increased by 15 per cent to 14.3million compared to 12.5million in the second half of 2012. The report is part of an on-going campaign by EFAMA and SWIFT to highlight the advancement of automation and standardization rates of orders of cross-border funds. A total of 32 transfer agents in Ireland and Luxembourg participated in the survey, representing more than 80 per cent of total incoming third-party investment funds order volumes in both markets. 
The report found that the total automation rate of processed orders of cross-border funds increased incrementally to 77.8 per cent in Q2 2013, compared to 77.7 per cent in Q4 2012. The total automation rate of orders processed in Luxembourg increased by 1.2 per cent to 74.9 per cent. In Ireland, the total automation rate decreased to 83.9 per cent in Q2 2013, compared to 85.3 per cent in Q4 2012.

Peter De Proft, EFAMA Director General, commented: “The progress of automation and standardization continued during the first half of 2013, thanks to a greater use of ISO messaging standards. This is good news for the industry as greater automation goes hand in hand with improved cost efficiency. Looking forward, reaching a total automation rate of 80 per cent supported…should remain a medium term goal.” 

Concerns that the development of a mutually recognized fund market between Hong Kong and China, which could in theory expand to the wider Asia Pacific region and thereby pose a threat to Europe’s UCITS brand are overstated, at least for the time being, according to research firm Cerulli, reported International Adviser. The survey of approximately 59 asset managers in July in collaboration with Citi Investor Services, found that while a minority believed the Hong Kong/China mutual recognition program represents a major threat to UCITS, the majority believe that regulators should keep an eye on developments in Asia and focus on maintaining the competitiveness of the UCITS brand.

Only 15.5 per cent of those surveyed believed that the mutual recognition program represented a “major threat” to Europe’s UCITS market, while 67.3 per cent thought it only represented “somewhat of a threat” and 17.3 per cent saw it as no threat at all. A quarter of respondents said the creation of a pan-Asian passporting solution would pose a major threat, with the vast majority – 65.4 per cent – viewing it is as no more than “somewhat of a threat”. 

Finally this week, in other fund news Schroders announced the launch of the Schroder GAIA Cat Bond fund on its GAIA platform. The new fund invests globally in catastrophe bonds (a minimum of 80 per cent) and other tradable insurance-linked securities. It will focus primarily in regions with a high concentration of insured wealth such as the US, Western Europe and Japan.

Daniel Ineichen will manage the new fund. Ineichen has been manager of the NGAR Secquaero ILS Fund since inception in May 2011. This fund has since merged into the new Schroder GAIA Cat Bond fund. Secquaero Advisors, which conducts research into insurance-linked securities, is the exclusive investment advisor to Schroders for its range of ILS strategies. The portfolios are actively managed by Schroders’ ILS investment desk in Zurich, while cat bonds and currency trading is executed by the fixed income and FX trading desks respectively in London. 

The primary objective of the Schroder GAIA Cat Bond is to generate a positive performance over the medium to long-term through investing in a diversified portfolio of tradable insurance-linked instruments with a focus on cat bonds. The fund’s outperformance target is 3-month USD Libor + 6 per cent annualised returns (net of fees). 

Ineichen was quoted as saying: “We are very pleased to be merging the fund onto the GAIA platform, which has grown to become one of the leading UCITS distribution platforms in alternatives investments. This is an exciting asset class with a strong investment case, combining attractive returns with a low correlation to other asset classes. The floating rate structure of cat bonds provides protection against rising interest rates, which is a widely acknowledged investor concern.”

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