Alternative UCITS Barometer

Transcription

1 Alternative UCITS Barometer Quarter 3, 2014

2 Introduction ML Capital Asset Management, the investment manager and promoter of the MontLake UCITS Platform, is delighted to present the 15th edition of the quarterly ML Capital Alternative UCITS Barometer (Barometer). The Barometer is designed to help identify and anticipate key trends in the demand for the major strategies within the Alternative UCITS sector. The capital introductory team at ML Capital survey a diverse range of 60 investors who collectively manage almost $95 billion and today invest upwards of $35 billion into Alternative UCITS, reflecting the widening of the investor base for regulated alternative products in Europe. Respondents range from insurance and pension funds to private banking organisations, with a significant constituent of financial advisers that deal with the primary source of Alternative UCITS inflows, the mid-net-worth investor. Commenting on the highlights of the latest Barometer, John Lowry, Co - Founder & CIO of ML Capital; With markets near all-time highs, investors are increasingly looking for Multi-Strategy funds which have the ability to deliver returns less dependent on market movements. Our latest Barometer shows a sustained high level of interest for Long Short funds focussed on the following areas, US equities, Global equities and those that concentrate on investing in the Emerging Markets. In the non-equity sector, for the family offices, wealth managers and other institutions that we interact with, there is also a strong demand for less correlated strategies such as Global Macro and Multi-Strategy funds. With asset levels at all-time highs in the overall hedge fund industry, a large number of well-respected US managers are now expanding their product ranges through launching a regulated UCITS product to support the widening of demand for investment products that are not fully dependent on the direction of the stock-markets". We hope that the Barometer will provide a useful insight into current appetite levels across some of the major sectors of the regulated fund universe. Should you have any questions then please do not hesitate to contact a member of our Cap Intro or Fund Hosting teams. Cyril Delamare, CEO 2

3 Q3 Barometer Highlights Participant Type Sharp Rise in Interest for Multi-Strategy Funds 49% 16% 18% The most dramatic result by far this quarter is for Multi-Strategy funds, which show an almost five fold rise in the levels of demand over last quarters result. There has been a large spike in the level of allocators to Alternative UCITS planning to increase the size of their Multi-Strategy holdings this quarter. Almost half of our respondents (47%) are looking to allocate to the space, with a cautious eye on the relatively highly priced equity and bond markets. 12% 4% Bank/institution Family Office Fund of Funds Private bank Wealth manager / IFA Bullish views on both US and Global Long Short Funds Highest level of interest for US Long Short strategies since the inception of the Alternative UCITS Barometer. Following a drop in interest towards the tail end of 2013, sentiment towards the US L/S space has somewhat changed and interest has rallied going into Q3. Furthermore, whilst UK Long Short slides out of favour, 51% of respondents plan to increase exposures to Global Long Short Funds. Participant Location 18% 16% 2% 63% Continental Europe Scandinavia Healthy Upswing towards Emerging Markets There is a healthy move back towards the Emerging Markets shown this quarter. Our research has highlighted that there is emphatic support for Globally diversified funds (39%) as opposed to the more targeted regional products. UK Switzerland 3

4 Looking to launch a regulated fund? ML Capital can help you. Whether it is a standalone fund structure or a new sub-fund of an existing umbrella, ML Capital s structuring team will be able to advise you on the best way forward. Investment Manager and Promoter to Regulated Funds Dedicated UCITS platform with access to top tier service providers Structuring expertise - Re-domiciliation, Mergers UCITS & QIAIF infrastructure support, enabling you to focus on your investment strategy Cross border distribution expertise and fund registration Experienced sales team for retail and institutional distribution ML Capital: your one stop shop for investment managers looking to launch a European regulated fund. For more information please contact info@mlcapital.com or

5 Long/Short Equities MORE SAME LESS Trending MORE LESS Global Long/Short 6 35% 14% 51% 5 4 US Long/Short 8% 31% 61% UK Long/Short % 8% 69% 4 Japan Long/Short 18% 16% 65% 5 4 5

6 Long/Short Equities MORE SAME LESS Trending MORE LESS European Long/Short 6 47% 6% 47% 5 4 Commentary This quarter, most Equity strategies continue to receive substantial interest from investors, with the biggest spike in demand experienced for US and Global Long Short funds. A slight majority (51%) are forecasting that they will be moving more of their asset base towards Globally diversified products this quarter, whilst over 6 plan to further increase their holdings of US Equity funds. After such a strong and sustained rally in equities and with global stock markets near or at their all-time highs, a degree of profit taking can be regarded as healthy. Whilst central banks continue to support stocks globally, some investors make the point that relative to bond prices equity markets continue to offer some value. Nevertheless, the next phase of the market cycle may well favour managers that adopt a more opportunistic, trading focused investment approach. Demand levels for European strategies, although still strong, have fallen back to a degree this quarter. Last time out, European funds were the most popular of all Equity strategies but have now been superseded by both the US and Global categories. Clearly many investors have significant concerns over the ongoing Eurozone situation. Despite these issues, the demand levels for European focussed Equity funds remains healthy with almost half of respondents (47%) expecting to raise their commitment levels. The fortunes of funds dedicated to the UK and Japan appear to be going in opposite directions, with a healthy upward spike towards Japan funds contrasting with a more muted interest level for UK strategies. 6

7 Emerging Markets MORE SAME LESS Trending MORE LESS Global Emerging Pan-Asia 33% 39% 29% % 8% 67% Latin America 2% 47% 51% Commentary A significant trend back towards Emerging Markets, with some respondents viewing the current levels as an interesting entry or reentry point following a difficult 2 year period. While still off its historic level of demand of 6 at the start of 2013, today almost 2 in 5 of respondents are looking to up their exposure levels to globally diversified EM products. However, somewhat of a contrarian or controversial viewpoint, as at the same time as 4 are looking to increase, one third of investors are in fact planning to reduce exposures to the very same strategy. It will be very interesting to see who has called this one correctly over the coming months. Emerging market economies are beginning to see the positive knock on effects from the economic recoveries in the developed world, led by the US and the UK. Many emerging markets have seen significant and painful depreciation in their currencies over the past 18 months. These devaluations have resulted in greatly improved levels of export competitiveness which should result in a strong export lead recovery in many of the economies of the developing world. Globally diversified funds are by far and away the most popular type of EM product, with a far lower level of interest shown to dedicated Asian and Latin American products, with the Lat Am space only showing a 2% level of interest. 7

8 Relative Value MORE SAME LESS Trending MORE LESS Market Neutral 6 16% 43% 41% 5 4 Convertible Arbitrage 2% 24% 73% 4 Fixed Income 27% 33% 41% Commentary Generally a modest level of interest is shown this quarter towards Relative Value strategies, although demand levels for Market Neutral funds remains relatively strong with two out of five investors planning to increase allocation levels. The general environment for Fixed Income investing has been difficult and while the Barometer for Q2 witnessed a sharp rise in demand, this has not followed through into the latest results in Q3. Against their long-term averages, corporate bond spreads are very tight and many investors are viewing fixed income markets as offering relatively poor value at present. However 41% of our respondents, as opposed to increasing or decreasing exposures, now plan to maintain their current levels of commitments, which represents almost a 10 increase from the results of the second quarter. While specific credit funds have generated consistent returns, the lack of a diversified range of Credit strategies still holds back the development of this part of the UCITS universe. 8

9 Event Driven MORE SAME LESS Trending MORE LESS Multi-Strategy 6 53% 47% 5 4 Distressed 9 Merger Arbitrage % 59% 27% 5 4 Commentary The most dramatic result by far this quarter is for Multi-Strategy funds, which show an almost five fold rise in the levels of demand over last quarters results. This may show a strong desire to de-risk equity heavy holdings. With M&A activity having picked up strongly, the last three years have been very conducive for Event Driven investing. This has been a main contributor to the excellent returns generated by Multi-Strategy funds. Event Driven funds continue to garner a lot of attention, and have continued to deliver solid results as a whole, driven in part by the increased number of bidding wars throwing up a number of opportunities to exploit. Interestingly, while the returns for the Event Driven sector in 2014 to date have been strong, they have lagged the returns they delivered in 2012 and The Q3 results of the Barometer show that the Event Driven sector is the only strategy to see 10 of investors planning to either maintain or increase their levels of commitment. 9

10 Macro & CTA MORE SAME LESS Trending MORE LESS Global Macro-Discretionary 31% 37% 33% Global Macro Systematic 8% 27% 65% Managed Futures / CTAs 2% 33% 65% Commentary Similarly to last quarter, Global Macro Discretionary funds continue to feed the current appetite of investors, with 37% of respondents planning to increase their exposure to the strategy, a marginal gain since last quarter. Whilst Global Macro funds have had a generally tough time in 2014, things have improved of late and have generated some strong returns in June helped by the supportive ECB measures announced in the early part of the month. We believe that the coming months are likely to prove very rewarding for the sector and clearly the latest results confirm that demand remains strong. In contrast, the Managed Futures/CTA sector remains out of favour, remaining at its lowest level of interest since the Barometer commenced in 2011, with only 2% of respondents looking to increase their allocation. However, some positive momentum within the space in Q2 has followed into the latest numbers with an increase in the numbers of those planning to maintain current allocations, climbing from 28% in Q2 to 33% in Q3. The strong returns witnessed over the past couple of months and the latest asset flows certainly suggests that investor sentiment is improving towards the CTA space. 10

11 Source Data Emerging Markets Long / Short Equity More Same Less More Same Less Global Emerging 38.8% 28.6% 32.7% Global L/S Equity % 14.3% Latin America % UK L/S Equity 8.2% 69.4% 22.4% Pan-Asia 8.2% 67.3% 24.5% US L/S Equity 61.2% 30.6% 8.2% Relative Value More Same Less Fixed Income 32.7% 40.8% 26.5% Convertible Arbitrage % 24.5% Market Neutral 40.8% 42.9% 16.3% European L/S Equity Japan L/S Equity 46.9% 46.9% 6.1% 16.3% 65.3% 18.4% Further Statistics Press Reported Event Driven More Same Less Multi-Strategy 46.9% 53.1% 0. Total Press Reported Alt UCITS Assets USD $ 265 bn Total Press Reported Hedge Fund Assets USD $3,000 bn Barometer Participants Distressed % 10.2% Barometer Surveyed Alt UCITS Assets USD $ 35 bn Merger Arbitrage 26.5% 59.2% 14.3% Barometer Surveyed Hedge Fund Assets USD $ 513 bn Highest Surveyed Alt UCITS Allocation USD $ 6 bn Macro & CTA Lowest Surveyed Alt UCITS Allocation USD $ 10 m More Same Less Highest Surveyed Hedge Allocation USD $250 bn Global Macro Discretio' 36.7% 32.7% 30.6% Lowest Surveyed Hedge Allocation USD $ 25 m Global Macro Systemat' 8.2% 65.3% 26.5% Highest Surveyed Avg Alt UCITS Ticket USD $ 302 m Managed Futures/CTA % 65.3% Lowest Surveyed Avg Alt UCITS Ticket USD $ 50 k 11

12 About ML Capital ML Capital is a forward looking and leading independent investment management firm specializing in European regulated fund structures, headquartered in Dublin, Ireland. As an award winning platform provider, we partner with the very best of investment managers to bring to market the latest most appropriate fund structures to comply with the raft of incoming regulatory requirements, whilst meeting the ever increasing expectations ofinvestors. ML Capital handles all aspects of the fund structuring and launch on investment managers behalf. Through our dedicated network we offer fund sales and distribution if required and have had comprehensive coverage of investors in all key European markets for the past 20 years. Our goal is to provide the most appropriate fund structures to maximize distribution opportunities across all key markets. Our solutions bring together market leading service providers with some of the very best minds in the regulated fund space; providing well managed European investment products with the highest levels of service and governance. We ensure that all incoming investors and partners come in with the full knowledge that they are investing into structures that are designed to protect and preserve investor interest. About The MontLake UCITS Platform The MontLake UCITS Platform, domiciled in Ireland and regulated by the Central Bank of Ireland provides investment managers with a turnkey solution for launching a UCITS fund under its umbrella structure. Typical time to market is 10 weeks, or less, with the platform offering immediate access toa wide range of investors through ML Capital s distribution network. Funds placed on the platform by ML Capital will benefit from top-tier service providers including Citi for custody, administration and trustee services, KPMG for audit, and Bridge Consulting for oversight and directorships. ML Capital has also ensured that managers utilising the MontLake UCITS Platform will have unfettered access to a network of the leading prime brokerage firms. For more information on ML Capital please visit our website or our platform website 12

13 IRELAND 26 Upper Fitzwilliam Street Dublin 2 Ireland SWITZERLAND Rue de la Cloche Geneva UK 30 St James's Square London SW1Y 4AL (0) (0) MALTA Suite 5 Tigne Palace Bisazza Street Sliema info@mlcapital.com

14 DISCLAIMER FOR INVESTMENT PROFESSIONALS ONLY This financial promotion is issued by ML Capital Limited. This document is not intended as an offer to acquire or dispose of any security. Information given in it has been obtained from, or based upon, sources believed by us to be reliable and accurate although ML does not accept liability for the accuracy of the contents. This information is not intended to constitute a basis for any specific investment decision. For Addressee only. The distribution of this report does not constitute an offer or solicitation. Past performance is not a guide to future performance. The value of investments can fall as well as rise. You should ensure you understand the risk profile of the products or services you plan to purchase. The services provided by ML Capital Limited are available only to investors who come within the category of the Eligible Counterparty or Professional Client as defined in the Financial Services Authority s Handbook they are not available to individual investors, who should not rely on this communication. Information given in this document has been obtained from, or based upon, sources believed by us to be reliable and accurate although ML Capital does not accept liability for the accuracy of the contents. ML Capital does not offer investment advice or make recommendations regarding investments. 14