RWC Partners has brought forward the launch of Peter Allwright and Stuart Frost’s UCITS III RWC Enhanced ARC (Absolute Rate and Currency) Fund from the end of Q1 to February 2011.
Allwright and Frost joined RWC Partners in October 2010 from Threadneedle where they were the joint portfolio managers of the Threadneedle Target Return Fund, Absolute Return Bond Fund and the hedge fund, Macro Crescendo Trading Fund.
RWC Enhanced ARC will be managed to target cash +6% on an annualised basis. The managers have historically managed both unconstrained macro funds and more conservative funds targeting cash +3%. In order to target cash +6% in the new fund, the managers anticipate using approximately twice the risk budget used in the more cautious funds.
In October 2010, Allwright and Frost assumed responsibility for the UCITS III RWC Cautious ARC fund which has a target return of 3% over cash rate on an annualised basis.
Allwright and Frost’s approach involves core allocations to short duration, high-grade fixed income securities, supplemented by alpha strategies that take advantage of investment opportunities in the fixed income and currency markets. As well as the investing in the currency markets, these alpha strategies are able to take long and short positions in the bond markets. This allows the overall strategy to make positive returns through the market cycle, including yield tightening environments.
The Enhanced ARC Fund will be a UCITS III fund with daily dealing, offering retail and institutional share classes in EUR, GBP and USD. The fees will be 1.5% for the retail share class and 0.8% for the institutional share class. Both share classes with carry a performance fee of 15% on returns over LIBOR or equivalent. RWC Partners will seek to have the fund locally registered across Europe including Italy, Germany, Luxembourg, the United Kingdom and Switzerland.
“Given the yield environment we have had a number of requests from our investors to accelerate the launch timetable for Peter and Stuart’s new fund," says Dan Mannix, head of business development at RWC Partners. "Investors are both seeking higher returns from their fixed income portfolios and are fearful that we are entering the start of a rate-rising environment. Peter and Stuart’s approach allows returns to be made from the fixed income and currency markets in a yield tightening environment.
“The new fund sits next to the fund they already manage that targets a return of cash +3%. In order to achieve the new fund’s target of cash +6%, Peter and Stuart will be taking more risk through scaling up their position sizes. However, the strategy remains the same in that it is a macro driven absolute return fund investing in the fixed income and currency markets. It is highly liquid and uses the same successful process the managers have used for many years.
“As with all our funds it is a priority that investors understand the risks associated with absolute return funds. It is unlikely that the returns for these funds will be achieved in a straight line. The approach has a very strong focus on capital preservation and therefore in down periods the managers will act quickly to preserve investors’ capital. Their historical track-record demonstrates that this approach has been extremely effective in the very challenging environments we have seen over the last few years.
“With yields as low as they are, investors are looking for opportunities to take a little more risk to generate returns, particularly in the bond space. A short duration bond fund with an active overlay in the currency and bond markets gives investors exposure uncorrelated with traditional long-only bond funds and other absolute return strategies.”
