18/01/2012 Author: Kirstie Brewer

Towers Watson adds CTA funds to its buy list

Towers Watson, one of the leading global investment consultants with over $2trn in assets under advisory, has added CTA hedge funds to its ‘buy lists’ for the first time, amid mounting interest in the strategy from investment consultants and their clients, HFMWeek has learned.

“Historically, while we thought CTAs added value from exploiting the trending behaviour of markets and the return profile tended to be highly diversifying relative to other hedge fund strategies, we had difficulties getting comfortable with the lack of transparency on the investment process and models used by these managers,” said Leon Beukes, senior investment consultant at Towers Watson.

“However, in the last 12 months we have identified some CTA managers that were willing to provide us with the transparency needed to for us to do our full due diligence as well as offering more reasonable fee structures.”

While the average CTA was down 3.05% last year, according to BarclayHedge, some of its players reaped big returns, such as London-based Cardwell Investment Technologies, which was up 10.91% for 2011.

Fresh allocations to the space may not be reserved for the biggest funds, noted Beukes, who said that Towers Watson “continued to find skilled managers across the size spectrum”.

Harmonic Capital, a London-based CTA with AuM of $867m, has reported a surge in interest over the last year, with the number of requests for information from pension funds “at least trebling,” according to Harmonic partner Alastair Smith.

“Pension fund consultants are advising their clients to invest in hedge funds, and expanding their resources in CTA and macro strategies, so it is inevitable that pension fund appetite for these strategies will continue to grow in 2012 and beyond," he said.