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A further raft of 130/30 funds have come to the market, including a vehicle from financial academic...
A further raft of 130/30 funds have come to the market, including a vehicle from financial academic Roger Ibbotson and several launches by Axa Rosenberg.
The Liquidity Arbitrage 130/30 offering comes from Ibbotson, CIO of Zebra Capital Management, and set to launch next month.
This global fund will use the concept of illiquidity as an investment style and aims to outperform the MSCI World Index.
The vehicle will have 1,200 holdings, effectively shorting the most liquid stocks and going long in the least liquid.
Ibbotson said this strategy outperformed the MSCI World on a back test and expects this performance to continue.
“The most liquid stocks sell at a premium and the least liquid sell at a discount,” he said.
“The whole market gets more liquid over time, giving the greatest benefit to the most illiquid stocks.”
Ibbotson added the concept is based around the idea that you have to pay more for liquidity.
He defines liquidity by share turnover rates and the number of shares traded each day.
“This product is trying to arbitrage liquidity. Illiquid assets come with more risk but can offer higher returns,” he added.
For more details see today’s Investment Week.
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