Three absolute return funds among raft of recent launches

Three absolute return funds were among a raft of launches seen last week despite the IMA reporting the highest outflows on record from the sector in August.

AXA Investment Management, BlackRock and Kames Capital all launched absolute return funds, which are designed to produce less volatile returns than long-only portfolios in declining markets.

BlackRock, noted for its expertise in equity absolute return, made its first foray into the AR fixed income space with the launch of the Absolute Return Bond fund for Ian Winship.

It targets positive performance above cash in all market environments using derivatives.

Tony Stenning, head of BlackRock’s UK retail business, said: “BlackRock has a strong pedigree in the absolute return sector, having launched the UK’s first equity absolute return fund in 2005, and extending our range into the fixed income space is a natural extension of this expertise.”

Winship will make use of BlackRock’s 400-strong fixed income team worldwide to invest across the fixed income spectrum including global rates, emerging markets, investment grade, high yield and others.

Kames Capital also launched its Absolute Return Bond fund for ex-OMAM manager Stephen Snowden, and colleague Colin Finlayson.

The managers aim to provide total returns over a rolling three- to five-year period, regardless of market conditions.

Kames already has strength in the fixed income space – its £243m Investment Grade Bond fund, run by Snowden and Euan McNeil, £504m Strategic Bond fund run by David Roberts and Phil Milburn, and £460m High Yield Bond fund, also led by Milburn, are all top quartile, according to Morningstar.

Meanwhile AXA added a third absolute return fund to its offshore range, a multi-asset portfolio for Serge Pizman.

The manager of the Luxembourg-domiciled AXA WF Optimal Absolute fund will look for “the best yield opportunities in equities, bonds, currencies and commodities.”

“At launch the portfolio was invested primarily in monetary products because volatility is high and the correlation between major asset classes continues to be unstable,” Pizman said.

“The impact of political decisions is high upon markets and so we are avoiding committing too much capital in this environment.”

AXA has also recently brought to market the WF Framlington Natural Resources fund, allowing investors to play the “ever increasing” demand for commodities.
Although only registered for sale in Luxembourg, AXA said it is considering registration across a number of European countries.

The fund is run by Sebastien Lagarde and Olivier Eugene, who invest in multi-cap equities exposed to energy, industrial metals, precious metals and soft commodities.

The launch follows a sharp sell-off in commodities, and established funds have seen their performance dragged down as equity markets continue to see the sharpest correction for two years.

Funds such as the £9.8bn BlackRock World Mining fund, and the £521m Baring Global Resources fund, are down 20.8% and 12.7% respectively in the last three months.

Last week also saw JO Hambro Capital Management launching two Asian equity funds following its acquisition of Singapore boutique Silver Metis Capital Management earlier this year.

The JOHCM Asia ex Japan fund, a concentrated all-cap portfolio, is headed up by Samir Mehta, while the JOHCM Asia ex Japan Small and Mid Cap fund will be managed by Cho-Yu Kooi.

Both Mehta and Kooi joined JOHCM from Silver Metis Capital Management on completion of the takeover in May 2011.

“Asia is not completely immune to the current macro upheaval, but with low levels of indebtedness, under-penetrated consumer markets and rising domestic incomes, it is well placed to ride out these storms,” said Mehta.

Allianz also looked to play Asia as it unveiled plans for its second renminbi fund.
Managed by Helen Lam, who has worked on RCM’s regional fixed  income team since 1999, it will offer investors exposure to the expected appreciation of the currency, investing in a range of renminbi-denominated currency deposits.

Lam already runs the group’s first renminbi offering which launched in May this year, but soft-closed in August having taken on €450m. The manager said she forecasts 4%-7% appreciation per annum in the Chinese currency.

“In spite of recent market volatility, the renminbi has appreciated at a faster pace since August which indicates the Chinese authorities are committed to taking steps to improve the currency's convertibility, with the ultimate goal of internationalising it.”