Magazine Issues » July-August 2014

FUND LAUNCHES: Aviva has its eyes on GARS-style success

BuildingWe examine the most interesting fund launches in the recent past and profile one fund a year after it began.

Standard Life Investments’ GARS fund is one of the big success stories of the multi-asset sector. One of the fund’s main architects, Euan Munro, now wants to repeat the trick at Aviva Investors, where has he has been chief executive since January.

Munro, who helped launch GARS while at Standard Life Investments, says multi-asset strategies can be “transformational” for clients and for asset managers. 

The industry will eagerly wait to see whether the Aviva Investors Multi-Strategy Target Return Fund can create the kind of transformation he wants to see.The fund aims for a 5% return above the Bank of England base rate, with volatility between a one-third and one-half of a typical equity fund.

As the world’s population expands, so does demand for natural resources such as wheat, coal and minerals.

Henderson Global Investors’ newly launched Horizon Global Natural Resources Fund hopes to capitalise on the rising demand in natural resources by investing in companies in the mining, energy and agriculture sectors.

The fund will be managed on a sub-advisory basis by 90 West, an Australian asset manager in which Henderson owns a 41% stake.

Lead fund manager David Whitten, executive chairman of 90 West, will pick between 40 and 60 stocks in companies with a market capitalisation of more than $2 billion (€1.5 billion)

The UK has followed fund domiciles including Ireland and Luxembourg by launching a tax transparent fund structure, and BlackRock says its fund is the first to market in this segment.

For tax purposes, investors in tax transparent funds are treated as if they owned direct shares in the funds’ underlying assets, a quality that can make the funds simpler and more tax efficient for some investors.

“Given the ever increasing complexity for today’s investors, delivering simple, transparent, tax efficient solutions has arguably never been more important,” says Tony Stenning, head of UK retail
at BlackRock. 

The BlackRock ACS US Equity Tracker Fund tracks the FTSE USA index, which includes large and mid-cap companies.

Like many investors in frontier markets, Oliver Bell, manager of the T Rowe Price Funds SICAV Frontier Markets Equity Fund, is fond of quoting statistics.

He says, for instance, that around 60% of Africa’s population and 50% of the Middle East’s population are under 24 years old; that by 2040, Africa will have the world’s largest working population; that frontier market companies are already delivering earnings growth of more than 20% a year.

Despite a recent flurry of interest in frontier markets, which have outperformed emerging markets in recent months, Bell believes frontier market equities are still under-owned and undervalued.

“Frontier regions have made great economic strides in recent years as economies and capital markets have liberalised,” Bell at T Rowe says.

Hamburg-based alternative investment manager Aquila Capital already ran several successful risk parity funds by

the time it launched the Risk Parity Bond Fund in 2013, but the new product was the first in the series to invest exclusively in fixed income.

Aiming for a return of cash plus 3%, the fund aimed to spread risk equally between government bonds, corporate bonds, carry positions in emerging markets and inflation-linked bonds.

“Capital is allocated based on the risk an asset contributes to the portfolio rather than predicted returns and market timing plays no role at all,” said Torsten von Bartenwerffer, senior portfolio manager at Aquila Capital.

The fund was seeded with client money and by the end of its first 12 months it had reached €125 million in size. The asset growth was driven largely by inflows since performance, at 2% over the 12-month period, was not as stellar as was hoped, and failed to meet the fund’s target of cash plus 3%.

The fund does not have a benchmark and Aquila Capital reckons that since it is the first fund of its type, it does not have a peer group to compare its performance against.

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