Alternative UCITS Barometer

Transcription

1 Alternative UCITS Barometer Quarter 3,

2 Introduction ML Capital Asset Management, the investment manager and promoter of the MontLake UCITS Platform, is delighted to present the 19th 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 surveyed a diverse range of 50 investors who collectively manage almost $325 billion and today invest upwards of $26 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, CIO of ML Capital; With authorities in the U.S. set to tighten monetary policy for the first time in eight years, investors expect the volatility we ve experienced during the summer to continue. Historically, Global Macro strategies have been proven to weather these periods of uncertainty much better than most, and we have seen a substantial rise in demand from investors for good global macro managers in recent months. Operating in the most liquid part of the market, they can nimbly capture opportunities and manage risk across many asset classes. However, identifying the right managers is not easy, as this segment of the hedge fund universe exhibits more variability in terms of returns and risks than others. 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 Barometer Highlights Participant Type 22% 2% The results from our latest investment Barometer indicate that risk aversion is the order of the day, with very high levels of demand for strategies that offer 61% 13% 2% downside protection from the current volatile market conditions. Global Macro Allocations More Popular Than Ever Demand for Global Macro funds is at its highest levels in over four years with 8 of respondents looking to make new allocations to the sector, and the remaining maintaining their current positions. Bank/institution Family Office Fund of Funds Private bank Wealth manager / IFA Investors Positive on Market Neutral Since Q4, interest in market neutral strategies has been rising steadily, and this quarter sees it at its highest levels yet, with 73% of respondents planning to increase their allocations in the sector. Participant Location 19% 22% Event Driven on the Rise Multi-strategy funds are also at peak interest levels this quarter, with 62% of respondents planning to increase their allocations, 36% maintaining positions and only 2% of respondents looking to exit. 38% Continental Europe UK Switzerland Rest of World 22% 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 and QIAIF platforms 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 Equity MORE SAME LESS Trending MORE LESS Global Long/Short 13% 22% 65% US Long/Short 16% 44% UK Long/Short % 11% 38% 3 1 Japan Long/Short 5% 5 62% 33% 3 1 5

6 Long/Short Equity MORE SAME LESS Trending MORE LESS European Long/Short 5% 44% 51% Commentary Last quarter s demand levels for global long/short funds have been maintained in ; however with only one in five investors planning to increase their allocations, this remains the lowest level of interest in over three years. Interest in US long/short funds has picked up, with 84% of respondents planning to maintain or increase their allocations. In, we highlighted our belief that the potential for a wide range of reported earnings should create additional opportunities for managers to add value, and it appears that investors agree. Some of the concerns about US growth and corporate earnings have been put to bed, and investors have reacted positively; of respondents plan to increase their investments in the sector, with a further 44% maintaining current levels. In contrast to last quarter, UK long/short equity has seen a big spike in interest, with 38% of those surveyed planning to increase allocations, a return to its peak level in this year. In addition, over half of respondents indicated that they plan to maintain their current exposure levels. Japan is one of the few countries that has seen its growth forecast revised up by Moody's this quarter, and this sentiment is echoed by investors. Japanese equity remains popular with one third of respondents planning to increase their allocations and a further 62% maintaining their current level of investment. Interest in European equity long/short managers has dipped somewhat, however investors still see a large degree of upside to European strategies, and it is the most popular target for increased commitments in the long/short equity sphere this quarter. 6

7 Emerging Markets MORE SAME LESS Trending MORE LESS Global Emerging % 49% 38% Pan-Asia 6% 38% 56% Latin America 4% 38% 58% Commentary Emerging markets in Asia are generally less susceptible to capital flight in the event of a US rate hike, and despite the turmoil in China, investor sentiment has held up remarkably well especially for Pan-Asian strategies. Therefore those managers that manage to navigate the markets best ought to attract significant flows, as Pan-Asia remains the most popular of the EM sectors, with over a third of those surveyed (38%) planning to increase their position. The majority will maintain current exposures, and only 6% plan to reduce or exit their positions. Moody s have forecast low or negative growth in Latin America this year, and this has knocked investor confidence in the region somewhat. One third of our respondents (38%) plan to reduce their LatAm allocations, although this is an improvement on this year, as we see a small minority (4%) looking to raise their exposure to the sector. There have also been sizeable downward revisions in the Moody s growth forecast for countries such as Brazil, Indonesia, Korea and Mexico in -16. This is reflected by our respondents decline in interest in the global EM sector since this year. 7

8 Relative Value MORE SAME LESS Trending MORE LESS Market Neutral 3% 24% 73% Convertible Arbitrage 4% 13% 83% Fixed Income 14% 24% 62% Commentary Market-neutral funds are designed to provide returns unrelated to the overall stock market. With the potential to boost returns and reduce risk, demand for market neutral strategies has been on a steady upwards trajectory since Q4, and this quarter sees it at its highest levels yet, with 73% of respondents planning to increase their allocations in the sector. This tallies with the general view that investors are seeking opportunities that may generate better returns in a potentially rising rate environment. The appeal of convertible arbitrage strategies lies in its potential to capitalize on pricing inefficiencies and make gains with a relatively lower degree of risk. 83% of those surveyed will maintain their exposure, although the number looking to decrease has jumped somewhat since, and is now at 13%. Demand for fixed income has remained flat, with little difference to survey responses, although the number of those looking to exit the strategy has decreased by 5% since the last quarter. The majority (62%) plan to maintain current exposures. However, with the Federal Reserve hinting at its first interest rate hike in almost a decade, this could see an upswing in interest as investors may adopt alternative fixed-income exchange traded fund strategies to generate yields and hedge rate risks. 8

9 Event Driven MORE SAME LESS Trending MORE LESS Multi-Strategy 2% 36% 62% Distressed 9% 2% % 1 Merger Arbitrage 2% 45% 53% Commentary The importance of an investment portfolio s diversity has been proven time and again over the years, and multi-strategy funds have the ability respond to market movements and trends, allowing them to more easily make the most of favourable market conditions. The diversification benefits help to smooth returns, reduce volatility and decrease asset-class and single-strategy risks. Unsurprisingly, multi-strategy funds are very popular this quarter, with 62% of those surveyed planning to increase, and the majority of others holding onto, their current exposures. Demand for merger arbitrage strategy funds also remains high, with over half of our respondents planning to increase their exposure to the strategy (53%) with a further 45% maintaining current levels. 9

10 Macro & CTA MORE SAME LESS Trending MORE LESS Global Macro-Discretionary 8 Global Macro Systematic 9% 29% 62% Managed Futures / CTAs 5% 33% 62% Commentary Despite a wide dispersion of returns within the sector, the strategy s ability to capitalize on macroeconomic opportunities, such as the potential increase of interest rates by the Federal Reserve, appears to be driving its popularity. Following the positive results in, investors are continuing to favour global macro funds. This quarter saw 8 of respondents looking to make new allocations in the discretionary global macro sector, with the remaining maintaining their current positions. Systematic global macro funds also proved popular with almost one third of those surveyed (29%) looking to increase their positions and the majority (62%) planning to maintain current exposures. This is reflected across the board, with a survey by Credit Suisse finding that global macro strategies continue to be the most favoured among institutional investors around the world. 10

11 Source Data Emerging Markets Long / Short Equity More Same Less More Same Less Global Emerging 38.2% 49.1% 12.7% Global L/S Equity 21.8% 65.5% 12.7% Latin America 3.6% 58.2% 38.2% UK L/S Equity 38.2% 50.9% 10.9% Pan-Asia 38.2% 56.4% 5.5% US L/S Equity % 16.4% Relative Value More Same Less Fixed Income 23.6% 61.8% 14.5% Convertible Arbitrage 3.6% 83.6% 12.7% Market Neutral 72.7% 23.6% 3.6% European L/S Equity Japan L/S Equity 50.9% 43.6% 5.5% 32.7% 61.8% 5.5% Further Statistics Press Reported Event Driven More Multi-Strategy 61.8% Same Less 36.4% 1.8% Total Press Reported Alt UCITS Assets USD $ 265 bn Total Press Reported Hedge Fund Assets USD $3,000 bn Barometer Participants Distressed 1.8% 89.1% 9.1% Highest Surveyed Alt UCITS Allocation USD $ 3 bn Merger Arbitrage 52.7% 45.5% 1.8% Lowest Surveyed Alt UCITS Allocation USD $ 10 m Highest Surveyed Hedge Allocation USD $ 250 bn Macro & CTA Lowest Surveyed Hedge Allocation USD $ 40 m More Same Less Highest Surveyed Avg Alt UCITS Ticket USD $ 63 m Global Macro Discretio' Lowest Surveyed Avg Alt UCITS Ticket USD $ 218 k Global Macro Systemat' 29.1% 61.8% 9.1% Managed Futures/CTA 32.7% 61.8% 5.5% 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 of investors. 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 Northern Trust 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

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14 DISCLAIMER 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