Progress report
An assessment of hedge fund YTD performance in the face of renewed fears for a potential eurozone crash Read More
06/04/2011
Pension investors open up to Ucits CTA benefits
After a period of mistrust, or just misunderstanding, pension funds have now come round to the abilities of CTAs.
While diversification remains crucial, interest will stay at a constant. But, how investors opt to access these managers is more fluid – with the funds of funds route slowly giving way to direct investment, a trend that many managers are hoping to tap, via the Ucits III space.
Ucits-compliant CTAs have a short pedigree. A year ago, Aquila Capital launched the first such fund. Twelve months later and it has spawned a number of similar strategies, including a Ucits version of the mighty BlueTrend, which emerged last April, hit $630m, only to be unwound over tracking errors.
Industry rumours suggest a BlueTrend Ucits may yet return, while other more concrete CTA launches are known to be in development. ML Capital’s – which operates the Montlake Ucits platform – quarterly barometer of investor demand shows that commodity strategies are still popular, while investors complain of being underserved in this area.
This scarcity is understandable. Ucits regulation doesn’t allow commodities exposure, and, even though CTAs use synthetics, they still struggle to meet requirements.
However, since the launch of Aquila, more prime brokers – Deutsche, New Edge, Bank of America – have launched products, usually designed around commodities indices, based on the underlying instruments the hedge fund wants to trade, to smooth structuring.
Easier access will spell more launches. And, while equity-based Ucits have faltered in garnering pension sector interest, CTAs – deemed a safer option to non-Ucits brethren, but remaining equally liquid – may prosper in this space.After a period of mistrust, or just misunderstanding, pension funds have now come round to the abilities of CTAs.
While diversification remains crucial, interest will stay at a constant. But, how investors opt to access these managers is more fluid – with the funds of funds route slowly giving way to direct investment, a trend that many managers are hoping to tap, via the Ucits III space.
Ucits-compliant CTAs have a short pedigree. A year ago, Aquila Capital launched the first such fund. Twelve months later and it has spawned a number of similar strategies, including a Ucits version of the mighty BlueTrend, which emerged last April, hit $630m, only to be unwound over tracking errors.
Industry rumours suggest a BlueTrend Ucits may yet return, while other more concrete CTA launches are known to be in development. ML Capital’s – which operates the Montlake Ucits platform – quarterly barometer of investor demand shows that commodity strategies are still popular, while investors complain of being underserved in this area.
This scarcity is understandable. Ucits regulation doesn’t allow commodities exposure, and, even though CTAs use synthetics, they still struggle to meet requirements.
However, since the launch of Aquila, more prime brokers – Deutsche, New Edge, Bank of America – have launched products, usually designed around commodities indices, based on the underlying instruments the hedge fund wants to trade, to smooth structuring.
Easier access will spell more launches. And, while equity-based Ucits have faltered in garnering pension sector interest, CTAs – deemed a safer option to non-Ucits brethren, but remaining equally liquid – may prosper in this space.
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60 seconds with... Kenneth Turchin
CAN YOU DESCRIBE YOUR CURRENT ROLE?
I have worked in public accounting and hedge funds and in the past eight years have been selling middle- and back-office services to the alternate investment industry. My role is to build relationships with clients, teach them about SS&C’s products and services, and ensure seamless transactions every time the firm launches a new fund.
IF YOU WERE DOWN TO YOUR LAST £1,000, HOW WOULD YOU INVEST IT?
I would buy THREE shares in Apple and hope for a repeat 383% return in the next five years.
WHAT WOULD YOU DO IF YOU WERE IN PRESIDENT OBAMA’S SHOES?
That’s one pair of size 12 shoes I do not want to be in!
WHO WOULD PLAY YOU IF THEY MADE A MOVIE ABOUT YOUR FIRM?
Kevin Bacon. He is a versatile actor and the centre of the entertainment universe. I am in sales. Everyone in the industry would be linked to me in six steps or less. My client list would be ridiculous.
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