‘Liquid alts’, as their known in the trade, or ’40 Act funds’ if you’re American, are finally making headway in the Australian wholesale sector with one of the established institutional brands, Capital Fund Management (CFM), getting its flagship product onto both the Macquarie and BT wraps.
The CFM ‘institutional systematic diversified trust’ is a balanced-style mix of alternative beta strategies which seeks to take advantage of factor anomalies, sustainable risk premia and their different cycles.
Steve Shepherd, the firm’s Tokyo-based head of Asia Pacific, said: “Demand from advisers for CFM IS Diversified Trust has been growing, so we are really pleased that Macquarie and BT have given us this vote of confidence, and that advisers will now be able to access our fund more easily.
“These kinds of strategies have historically been associated with hedge funds – which aim to produce absolute returns [that] perform in a wide range of market conditions.
“Hedge fund managers employ a wide range of investment strategies not always available to other investors – and these ‘alternative’ strategies produce a return profile which seeks to be un-correlated to traditional asset classes.”
CFM is a French-based global quantitative manager, represented in Australia by Winston Capital Partners. It is not to be confused with the Capital Group, the big US-based global manager which has its own office in Sydney.
CFM’s retail offerings were launched in Australia in November 2015 by partner Philippe Jordan, who has been a frequent visitor and speaker at the annual AIMA Australia alternatives conference in Sydney. Zenith has rated the fund.
Liquid alternatives have proved extremely popular in the US in recent years but remain a little controversial among hedge fund managers because of the theory that investors may be giving up too much of the benefits of the original, less liquid, strategies to satisfy the liquidity demands of the wholesale/retail sector.
They are called ’40 Act funds’ in the US because of the old regulatory rules – dating back to 1940 – which place extra demands on long/short and other hedge-fund-like processes for mutual funds.
One of the earliest and most successful risk premia managers in the Australian institutional space is London-based GAM, which has also grown a wholesale/retail presence here in the past few years. It is represented in Australia by Shed Enterprises.
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