November 2010

FUND LAUNCHES: new on the scene

emerging_egg_vertEmerging markets are not the only themes in recent fund launches. F&C offers European equities and Jupiter offers convertible bonds. Amundi brings its first alternative multi-manager to market that can invest globally, finds Nick Fitzpatrick Amundi, the investment management firm that resulted from the combined asset management businesses of Credit Agricole and Société Générale, launched its first Ucits III absolute-return multi-manager fund in October and if there is anything else that made this launch notable it was the absence of an emerging markets theme at a time when the sector continues to dominate fund launches.

Also free from emerging markets talk was the F&C pan-European fund.

Amundi’s long-short equity offering, which offers weekly liquidity, exists as a sub-fund of Amundi Funds, the name of the firm’s Luxembourg-domiciled umbrella Sicav vehicle.
The sub-fund invests in the Ucits III funds of other asset managers that employ long/short and equity arbitrage strategies, as well as volatility management.

Known as the Amundi Funds Multimanagers Long/Short Equity Fund, it aims to outperform the Euro OverNight Index Average (Eonia) – an index based on the overnight interest rate in the Eurozone interbank lending market – by 5% per annum while maintaining a maximum level of annual ex-post volatility of 8%.

Amundi says: “The current environment of low interest rates, economic uncertainty and high volatility is particularly favourable for absolute-return strategies, which aim to capitalise on the divergence in performance between securities, sectors or geographic regions rather than on global market trends.”

The volatility aspect allows the fund manager to allocate up to 10% of the sub-fund’s assets to volatility strategies in times of market stress. The aim is to provide further diversification, moderate the portfolio’s correlation to equities and offset the impact of market downturns. European equities
With fund flows dominated by emerging markets and fixed income recently, European equities are far from a market trend at present, but F&C Investments has launched a fund that seeks a combination of capital growth and income from this out-of-fashion asset class.

The Luxembourg-domiciled F&C European Growth & Income fund, also structured as a Sicav, invests on a pan-European basis and currently holds investments in 13 countries with approximately 22% in the UK, 20% in the Netherlands, 14% in Germany and 11% in both France and Switzerland.

It is managed by Paras Anand, head of European equities, who also manages a UK Oeic fund focused on Europe ex-UK which, F&C says, successfully adopted a growth and income strategy two years ago.

The manager looks to blend a focused portfolio of blue-chip long-term investments where he believes the market is materially mis-pricing a company’s prospects. The fund invests across sectors but currently is heavily overweight financials. The yield on the current portfolio is estimated to be approximately 3.7% compared with a benchmark yield of 3.2%. Dividends on the fund will be distributed quarterly.

F&C’s European investment team avoids bias to any particular investment style, the firm says, adding that this is a “key component of maintaining the potential to deliver in all market conditions”. Fundamental company analysis lies at the heart of the approach and “the manager and team have exceptional access to company management as well as the ability to conduct extensive qualitative and quantitative research”.

The fund, which has both a euro and sterling share class, was launched with client seeding of some £60m (€69m) and is initially registered for sale in Austria, Ireland, UK, Germany, Finland, Italy, Netherlands, Spain and Sweden.

Two fund launches from Jupiter Asset Management take us back into macro themes that are related, at least distantly, to emerging markets. However, the main reasoning for Jupiter’s Strategic Total Return and Global Convertibles funds – which both invest globally – is more to do with volatility created by the West’s problems than opportunities in sub-developed markets.

Miles Geldard, who along with Lee Manzi, will manage the two funds, says: “In my view the West can expect several years of subdued economic growth because banks, governments and consumers need to deleverage. This era of lower growth and low interest rates will make it harder to generate returns.

“However, with greater volatility comes greater opportunity. A higher level of uncertainty among investors should also provide greater opportunities to turn a profit from significant anomalies in relative value. We are going to structure our portfolios to reflect these current conditions.”

Again, the funds are Ucits III sub-funds of a Luxembourg-domiciled Sicav, the Jupiter Global Fund.

In the current unstable environment the managers believe that the “conservative equity” characteristic of convertible bonds as an asset class has the potential to be attractive. Convertible bonds can also be a useful diversifier away from conventional debt, they say.

“A key factor in the management of the Jupiter Strategic Total Return Fund is the flexibility we have to back our convictions from an actively managed portfolio of different asset classes, including equities, bonds, convertible bonds, currencies and money-market securities on an international basis,” says Geldard, who has spent 13 years in the discipline.

“The fund is intended to provide a steady return so that investors can ride the waves through what will be turbulent times. This style of management is what we have built our reputation on and we intend to stick with what we believe is a proven method.”

The Global Convertibles fund aims to achieve long-term capital growth through investment in a portfolio of convertible bond securities, diversified by geography, industry, credit rating or market capitalisation. Commodities supercycle
Merchant Capital, a Ucits umbrella provider to the hedge fund industry, was due to launch a $15m (€10.7m) global resources fund at the beginning of November. The initial capital is sourced from a mix of European institutional and private investors.

The Merchant Global Resources Ucits Fund will employ an absolute-return equity strategy with a long-biased approach to investing in global resources-related equities, debt and derivatives.

Tal Lomnitzer, manager of the fund, says: “With the industrialisation and urbanisation of emerging economies we believe that the global economy has entered a supercycle for commodities; therefore, this is a great time to launch a resources-focused strategy.”

Lomnitzer has previously worked at ORN Capital Global Resources Fund, and he has also managed funds for Deutsche Asset Management and most recently for NewSmith. He is advised by Mark Latham, a founder of Commodity Intelligence.

The strategy combines a top-down thematic approach with in-depth bottom-up valuation work in order to choose the 100-150 stocks the fund will be invested in at any one time. Investments are sector-focused, concentrating on global energy, mining, precious metals and agriculture, principally through equities.

Merchant Capital is targeting European-based investors from a wide base, including retail channels, family offices, pension funds and funds of hedge funds.

©2010 funds europe

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