Investors are getting worried about alternative UCITS funds using total return swaps according to a new quarterly survey conducted by Geneva-ba
Investors are getting worried about alternative UCITS funds using total return swaps according to a new quarterly survey conducted by Geneva-based Alix Capital reported Citywire Global this week. The questionnaire was sent out to 118 industry professionals across Europe, including FoHF managers and direct investors, to help identify the key issues with those active in the space. Most hedge fund managers rolling out newcits seek to replicate their offshore strategies by directly holding underlying securities, but there are some that use a total return swap (TRS) instead. Louis Zanolin, a partner at Alix Capital, said that 63 per cent of respondents were “concerned” with the TRS structure, not least because of the added uncertainty of counterparty risk. With it being largely a second option, Zanolin said that those providers choosing to use a TRS approach would need to “further convince investors about the benefit of such a structure”. Despite the concerns, it doesn’t appear to be dampening investors’ appetite with 77 per cent confirming they were already invested in a newcits fund and 82 per cent planning to increase their exposure. Equity l/s (45 per cent) was the strategy investors favoured the most with respect to increasing exposure levels. Fixed income, macro and FX were those likely to suffer reductions.