Old Mutual Global Investors is to launch the Old Mutual Absolute Return Government Bond Fund, which is a UCITs fund, and the Old Mutual Liquid Macro Fund, which is a Qualifying Investor Alternative Investment Fund on 7 October 2015.
The strategy will launch with USD150 million seed capital from Old Mutual plc.
The Funds will be managed by Russ Oxley and his team, who joined Old Mutual Global Investors from Ignis Asset Management earlier this year. Russ, the Lead Manager, and Co-Managers Adam Purzitsky and Paul Shanta, will be supported in their portfolio management and trading by Huw Davies and Jin Wong, and in systems development by Josh Heming.
Warren Tonkinson, Managing Director of Old Mutual Global Investors, says: “This is a very exciting development for our company as a lot of work has been undertaken to prepare for the launch of this range. We have had a lot of interest from investors as Russ and his team are highly respected, having one of the best track records of managing absolute return government bond funds in our industry. We are therefore confident that demand will be strong from our global client base.”
The objective of the Funds is to seek to deliver positive total returns on a rolling 12-month basis with stable levels of volatility uncorrelated to bond and equity market conditions. The UCITS fund will be managed to a volatility target of 4 per cent-6 per cent, with expected annualised returns of cash plus 5 per cent. The QIAIF, which will also offer Investors Daily Liquidity, will be managed to a volatility target of 7 per cent-9 per cent, with expected annualised returns of Cash +8 per cent. The Funds aim to be diversified from global fixed income markets by employing a highly distinctive investment strategy focused on expressing views on macro themes through exposure to forward interest rates, inflation expectations and foreign exchange.
The low correlation with global bond markets is likely to be appealing at a time when the traditional safe-haven role of government bond markets is increasingly questionable. Due to the distinctive process and avoidance of credit and credit-like assets, and of emerging market debt the Fund is also expected to exhibit low correlation with other absolute return investment strategies (including global macro hedge funds, fixed income, equity and multi-asset based strategies), making it a potentially attractive addition to a portfolio. The portfolio managers will place a strong emphasis on investing in highly liquid assets, in which the market has historically remained liquid, even in the most extreme periods, including for example the global financial crisis.
Donald Pepper, Managing Director of Alternatives, says: “We are delighted that Old Mutual will be supporting the strategy with USD150 million of seed capital at launch. This demonstrates the belief we have in the strategy and our commitment, to both these Funds, and to the development of the Alternatives business within Old Mutual Global Investors. We have successfully delivered uncorrelated returns in our highly liquid Global Equity Market Neutral strategy, which now has over USD4.5 billion¹ in client assets under management, and we hope for similar investor support for this highly liquid, uncorrelated, strategy.”
Adam Purzitsky, Co-Manager of the Fund, says: “Our investment philosophy hinges on the belief that, through a detailed understanding of forward interest rates, it is possible to express views on global macro trends in a very precise way. Through our approach to investing, we are able to target specific risks and opportunities, without “inadvertently” taking economic exposures to those risks we would rather avoid. At the core of our approach is the understanding that forward rates are influenced by very different factors depending on their location on the curve. We believe we have the potential to deliver positive returns for investors within clearly defined volatility parameters irrespective of the direction of interest rates. Our investment track record of successfully managing these strategies is clear evidence that our process if very effective.”
Paul Shanta, Co-Manager of the Fund, adds: “We have developed a unique investment strategy over a period of many years and a product that we think plays a valuable role in our clients’ wider portfolio. Joining Old Mutual Global Investors has given us the opportunity to further enhance our processes and technology and to prepare a bespoke platform for the launch of our new funds. We are excited about being part of an organisation that shares our ambition and now look forward to working with investors.”