Boutique asset manager Unigestion has launched Uni-Global – Alternative Risk Premia, an actively managed strategy to provide investors with cost-effective and liquid sources of returns modestly correlated to equity and bond returns.
It complements Unigestion’s existing line of direct alternative offers, including the Uni-Global – Cross Asset Trend Follower, Uni-Global – Alternative Equities Compass World, the Unigestion Long/Short Global Opportunities fund and the Uni-Global – Absolute Return.
The launch of this strategy addresses three major concerns for investors and the asset management industry.
Firstly, expected returns for traditional investments are not very attractive, as bond yields remain at historically low levels while equity valuations are stretched; secondly, macroeconomic and political risks could trigger a surge in volatility; and thirdly, the typical cost structure imposed by hedge funds is in general not commensurable with the returns they are delivering.
Unigestion undertook to design a strategy that would distil the sources of hedge fund returns in a more cost-effective way and identified the risk premia (risk which investors are rewarded for taking) that would best achieve this.
The three main families of underlying risk premia in the strategy are equity factors (value, quality, size and momentum), carry (extracting the excess yield of assets with higher income streams vs lower income streams) and trend following (the tendency for trends to exhibit persistence). Adding Unigestion’s proprietary risk models and defining the most efficient capital allocation to create well-balanced exposure to macroeconomic regimes produces an alternative return stream with low correlation to equities and bonds.
The strategy will target returns of cash +7 per cent pa gross of fees over a three to five year investment horizon and is designed with daily liquidity within a UCITS structure. The strategy also seeks to limit volatility to 8 per cent, potentially providing smoother risk-adjusted returns for investors.
The strategy will be run by a portfolio management team of alternative experts from Unigestion’s equity and cross asset solutions teams.
Jérôme Teiletche (pictured), head of cross asset solutions, says: “Our Alternative Risk Premia design draws on years of research and deep understanding of how hedge fund returns are generated. While there is undoubtedly still a place for talented hedge fund managers that deliver true alpha, this type of strategy is attractive to any investor looking for alternative sources of return that are thoroughly risk managed, liquid and cost effective.
“We have used the research and resources we have at Unigestion to develop this strategy over several years and we are confident that it will provide our clients with a truly diversifying source of risk-adjusted returns.”