Investec Asset Management is launching a new Global Extension Fund managed by James Hand, Investec’s Head of 4Factor Research, based on a portfolio that uses derivative instruments to go b
Investec Asset Management is launching a new Global Extension Fund managed by James Hand, Investec’s Head of 4Factor Research, based on a portfolio that uses derivative instruments to go both long and short in the same portfolio whilst retaining net exposure of 100% (the style of investment commonly known as 130/30).
Investec Asset Management will create the strategy utilising its established 4Factor investment process. The 4Factor process is already well-known to consultants and pension funds as the engine that powers some of Investec Asset Management’s long only products.
The process aims to systematically highlight both the best and worst stocks in its universes and it is therefore ideally suited to the construction of a strategy that uses both long and short ideas.
The Global Extension strategy will typically have full net exposure of 100 per cent but retains the ability to change the degree of extension (e.g. 130/30 to 120/20) in order to capitalise on changing market conditions.
James Hand, manager of the Global Extension Fund, says: ‘Extension portfolios provide fund managers with the flexibility to make more meaningful investment decisions.
‘In a traditional fund, where the managers are only able to go long, their hands are often tied if he wants to significantly underweight a holding, particularly in companies which are a small part of the benchmark.
‘If fund managers are able to go short then it is possible to take a larger negative position which reflects the true strength of their views. In addition, the extra cash released from the short positions can be used to reinforce positive long positions, thus further increasing conviction within a portfolio.’
Domenico Ferrini, director of investments at Investec Asset Management says: ‘In an era of lower returns, investment management companies are continually searching for tools and strategies that will deliver higher returns to institutional investors.
‘We believe that Extension funds can offer our clients great opportunities to use their capital more efficiently and to invest in a high-conviction strategy that is statistically likely to benefit from an increased information ratio and potentially a better risk/return profile
‘The investment world continues to wake up to the possibilities provided by extension strategies. At Investec Asset Management we believe our combination of an established global equities team with a well-tested investment process, blending quantitative and qualitative elements; and the flexibility that we have built into the fund’s structure by lifting the limitation to 130 / 30 ratios give us a powerful rationale for success.’
