October 2016

FUND LAUNCHES: Fund launches review - October 2016

We profile some of the most interesting fund launches in recent weeks and examine the performance of a product already on the market.

UK EQUITY INCOME
Columbia Threadneedle Investments has launched an offshore version of its £3.4 billion (€4 billion) UK Equity Income fund.

The fund will emulate the performance of an onshore strategy. The onshore fund typically holds 45-60 positions, primarily in UK-domiciled stocks, or companies with a heavy UK focus. Stocks in any industry are eligible for inclusion. The fund aims to deliver a dividend yield in line or greater than the FTSE All Share TR Index over three years rolling, gross of fees. Capital growth is also a stated objective.

Over the past five years, the onshore UK Equity Income fund has delivered an annualised return of 10.7%.

The offshore fund will be available to investors from the start of October this year, and will be available for sale in the UK, France, Germany, Italy, Spain, the Netherlands, Luxembourg, Switzerland, Portugal, Austria, Belgium, Finland and Sweden.

The launch of the fund follows recent news that Columbia Threadneedle has applied for regulatory permissions in Luxembourg, following Britain’s vote to leave the EU.

A spokesperson for the firm said the offshore fund was being launched in response to demand from overseas investors.

ABSOLUTE RETURN
BlackRock has launched an Asia Pacific Absolute Return fund.

The fund employs a liquid equity long/short strategy and targets positive returns irrespective of market environment. The portfolio will typically be comprised of 40-60 long and 40-60 short positions and may use equity swaps, contracts for difference, index futures or exchange-traded funds, and equity options.

The fund’s managers will be supported by a localised Hong Kong and Taiwan-based team, totalling 21 investment professionals.

Its investment universe spans 14 markets, numerous currencies and more than 2,000 companies, covered by fewer analysts than in the US or Europe. The BSF Asia Pacific Absolute Return fund will aim to exploit the under-appreciated areas of strength, while benefiting on the short side from internal and external pressures on companies, a spokesperson for BlackRock said.

FRONTIER MARKETS
UK boutique Banor Capital has launched a fund focused on frontier market equities.

Frontier markets tend to have a low correlation with more developed markets and show favourable growth trends, the  firm said.

The fund has a quantitative investment approach designed to exploit market inefficiencies that are a feature of frontier markets. The aim is to generate positive returns in the medium to long term by actively managing risk and focusing on daily liquidity products.

The portfolio is geographically diversified, with investments primairly in Argentina, Kenya, Pakistan and Vietnam. The portfolio’s principal focus is financials, consumer staples and telecommunications.

The investment vehicle has been launched in conjunction with  Kallisto Partners, an independent Rome-based firm that specialises in quantitative methodologies for investment in financial markets during their early development stages.

GLOBAL BRANDS
Morgan Stanley Investment Management (MSIM) has launched a Global Brands Equity Income fund, an enhanced income version of its Global Brands strategy. 

The aim of the new fund will be to deliver a yield of 4% per annum, to be achieved via a combination of dividends from high-quality stocks and premiums from index overwriting options.

The vehicle will be managed by William Lock, head of MSIM’s international equity team, alongside Bruno Paulson and Dirk Hoffmann-Becking.

The fund will invest in companies that deliver a high return on capital, and are capital light, meaning they can afford to maintain their payouts to shareholders.

A spokesperson for the firm said this approach would allow the fund to offer long-term compounding of capital, coupled with relative downside protection.

They added that the portfolio’s high quality bias offered a more robust approach to income generation than that typically offered by other income funds.

The fund will have both UK-domiciled Oeic and Luxembourg-based Sicav versions.

Its parent, the Morgan Stanley Global Brands fund, has returned 56.9% over three years to September 7, 2016.

This compares with the IA Global sector average of 32.9%, according to Morningstar data.

ONE YEAR ON
A year ago, Legal & General Investment Management launched a credit fund.

The fund has outperformed its benchmark since inception, growing by 2.9% against 0.36%. despite a global backdrop of imbalance and downside risk. As of June 30 this year, it holds assets of $77 million (€68.5 million).

The team uses diversified sources of return across a wide range of fixed income securities, including investment grade, high yield and emerging market debt.

It aims to provide growth and sustainable cash flow at relatively low risk, targeting returns of cash + 5% annually over a rolling five-year period.

The fund initially employs top-down analysis to identify strategic themes and assess their impact on different markets.

The portfolio’s cautious positioning in corporate bonds detracted from performance, as credit markets remained unexpectedly resilient.

This was particularly evident in emerging markets, and commodities, both of which been a drag on performance.

Conversely, long positions in short-dated, high yield credit, and a bias towards long duration and short inflation were key positive contributors.

©2016 funds europe