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Funds Round-Up May 2006

Stephen Harris

7 June 2006

Assets invested in funds of funds in the UK have hit record levels over the first quarter of this year with £26 billion ($48 billion) under management, according to figures released by the Investment Management Association. Funds of funds have shown an increase of 68 per cent on figures for the first quarter of 2005. Sales of funds of funds stood at £921 million for the first quarter of this year, which is a slight decrease from the previous quarter, which saw sales of £1.1 billion. The latest figure is still almost two and a half times higher than the £376 million seen in the first quarter of 2005. Balanced funds accounted for the majority of funds under management, representing 69 per cent of assets, followed by 19 per cent in equities. Some 44 per cent of net funds of funds sales were invested internally and 56 per cent externally. The most popular sectors for funds of funds gross sales in the first quarter of this year were the cautious managed and balanced managed sectors. Richard Saunders, chief executive of the IMA commented: “At almost £900 million, net retail sales of funds of funds reached an all time record level in the first quarter. They continue to increase in popularity and are now running at about 20 per cent of all fund sales.” Skandia Investment Management, the asset management arm of the Skandia Group, is to launch a Global Best Ideas Fund. The fund, which selects ten world class managers, takes their ten "best stock ideas" and combines them into a single fund, is due to launch on June 13. Skandia said in a statement: "The fund is aimed to represent what managers might buy with their own money – indeed several of the managers are expected to invest in the fund themselves. "It’s a unique concept which aims to maximise the benefits of multi-manager investing to the full." Christows, the UK fund manager, has tied up a deal with Royal Skandia, the offshore life company, to directly manage client assets within Royal Skandia's portfolio bond range. The deal allows IFAs to delegate investment authority on Skandia's bonds to Christows and overall it will reduce dealing charges and manage portfolios more efficiently. Christows is the second UK firm to update its dealership technology to provide data link ups and operate with "Harvester", Skandia's electronic administration system. Robin O'Grady, director of sales and marketing at Christows told WealthBriefing: "It has taken us a while to get to this point of tying up a deal with Royal Skandia having done similar deals with Axa and Canada Life." Christows believes there are exciting marketing oppportunities attached to the joint agreement around the UK's South Coast, where Skandia has a successful footprint. "There are lots of developments along the coast and many high net worth individuals located there, especially the sailing and yachting fraternity," he said. Fidelity’s Special Situations Fund in India has attracted a record $445 million in its first month, taking its assets under management to more than $1 billion in India, a market it entered a year ago. The India Special Situations Fund is modeled on Fidelity’s successful UK Special Situations Fund, which has attracted more than 250,000 investors. The special situations concept focuses on underperforming companies with potential for recovery and unfashionable companies with improving fundamentals. The boom in India has been fuelled by a stock market rally, which has seen India’s Sensex index rise 200 per cent in the last five years. Tactica Fund Management, which was recently set up by Jon Ions, the former managing director of SG Asset Management, plans to work with Goldman Sachs to white-label one of the bank’s investment products to intermediaries, according to a report by Citywire. The report said Tactica plans to act as a middleman to enable the Balanced Opportunities fund, a Gibraltar-based multi-asset fund run by Goldman Sachs’ private bank, to be white-labeled by intermediary firms. Tactica is still waiting for regulatory approval, according to the report. But the firm has recruited Jonathan Cook as deputy to Mr Ions. Mr Cook was the head of Deutsche Asset Management’s retail business until 2000. The Citywire report said Tactica has backing from the Kuwaiti Al Sabah family, which also has interests in Savoy Asset Management, another boutique private client asset management firm based in London. Close Fund Management is joining forces with BlueCrest Capital Management to bring BlueCrest’s multi-strategy fund AllBlue to UK investors. The fund, founded last September and previously only open to US investors, will be available via a new AIM-listed vehicle Close AllBlue, which closes on 18 May. Close AllBlue Fund is intended to “bridge the gap between single strategy hedge fund managers and fund of funds”. AllBlue has already raised over $1 billion and returned 8.4 per cent since launch with an annualised return of 12.1 per cent and a volatility of 6 per cent. The Close AllBlue Fund is aimed at the UK institutional market, fund of fund providers, top-end financial advisors and private client brokers. It offers access to a portfolio of seven diversified strategies managed by BlueCrest and managers with close links to BlueCrest. The sterling Shares are “PEP/ISA able” and require a minimum investment of £37,500($69,776). BlueCrest manages a diversified group of funds with over $9.2 billion of assets as of 1 April 2006, which are aimed at institutions, fund of funds and high net worth individuals. Sarasin Chiswell, the UK-based wealth management firm owned by Bank Sarasin, has launched the first two of a range of sister funds which aim to take full advantage of new UCITS III legislation. With the toolkit offered through UCITS III, Sarasin believes it can offer private investors a product that compares with anything in the offshore hedge fund market, but without the cost or distribution issues for onshore investors that typically accompany a fund of funds approach. Guy Monson, chief investment officer, Sarasin Investment Management, told WealthBriefing: “We think that UCITS III regulations are modern, state-of-the-art; it is something that is eminently usable once you have made the initial investment. People who might have thought this was a bit arcane are now waking up to UCITS III, especially since the derivatives regulations of 2004." The group’s first two re-branded funds, Sarasin GlobalStar IIID and Sarasin EquiStar IIID, will offer UCITS III-compliant investment options to intermediaries, private clients, and institutions with the aim of producing returns in excess of the retail price index plus 3.5 per cent. This follows consultation with the firm’s clients as to what they consider constitutes a “real” return. Guernsey has continued to see strong growth in funds under management for the fist quarter of this year, with an increase of £11.3 billion ($21 billion) at the end of March. Funds have grown at a rate of 11.3 per cent to bring the total up to £111.4 billion. Over the year as a whole values increased £35.8 billion, an increase of 47 per cent. Guernsey domiciled open-ended funds grew by £5.3 billion or 10.9 per cent over the last quarter, and £17.2 billion over the year, reaching a record £53.5 billion. Guernsey closed-end funds also grew by £2.7 billion over the quarter and by £10.3 billion over the year to a total of £33.8 billion. By the end of March, 42 Qualifying Investor Funds has been approved since the launch of the scheme on 7 February. Peter Moffatt, director of investment business at the Guernsey Finance Commission, said: "New fund approvals continue to run at record levels. And there is a continuing flow of inquiries from those with an established track record of domiciling their international funds in Guernsey." Feri Finance, the private client manager is to strengthen its relationship with German wealth manager, MLP, by provinding a range of products to be distributed to MLP's German private and institutional clients. The two firms have signed an agreement which bolsters their existing 12-year relationship. The move is part of Feri Finance and Feri Institutional Advisor's march into continental Europe, bringing more German institutional clients under its ambit. Feri has 180 employees and is based in Frankfurt. Three Swiss private banks – Vontobel, Pictet and Bank Sarasin – have taken the top three places in a performance league table compiled by EDHEC, a business school, and EuroPerformance, a European fund rating agency. The “Alpha League Table” showed first place was shared between Vontobel and Pictet, with an alpha frequency of 29.9 per cent and an average alpha rate of 3.1 per cent. Bank Sarasin took third place. The league table showed that specialists and private banks dominate the top places in the rankings with investment management oriented towards emerging markets and sector funds. The Europerformance rating methodology differs from the conventional systems used by Morningstar and S&P because the asset manager's retail funds are evaluated solely on the basis of the excess return − or "alpha" − generated by the portfolio. Market performance − or "beta" − is completely disregarded. All of the funds which are awarded four or five stars are then included in an overall evaluation of the asset manager. The average value of these funds provides the total score. The evaluation by Europerformance is also risk-adjusted. Julius Baer has launched two actively managed commodity funds, in line with the Rogers International Commodity Index. Julius Baer Commodity Fund and Julius Baer Commodity Fund are the first actively managed commodity funds launched in Luxembourg under UCITS III. Active management means that the funds systematically over, or underweight in individual commodities in relation to the benchmark, enabling them to respond rapidly and flexibly to new trends and changes in the market environment, said Julius Baer in a statement. Both funds invest in a broadly diversified portfolio of commodity futures industries, including, metals, energy, agriculture and livestock. Julius Baer has employed Diapason Commodities Management to manage both funds. The funds are currently approved for public sale in Switzerland, Germany, Luxembourg and Austria, and the approval process is already under way in other European countries. Vontobel and responsibility have launched the world's first listed financial product through which investors can support the development of independent media work in developing countries whilst achieving a financial return. Called the Voncert responsAbility Media Development, the new fund combines a fixed-income investment with an investment in the Media Development Loan Fund, which supplies loans on favourable terms to independent media organisations in emerging democracies. The product will be marketed by Bank Vontobel and the Swiss Agency for Development and Cooperation. The central component of the product is a loan to MDLF, charged at 1 per cent interest which has been integrated into a tradable structured fixed-income product. Investors can therefore invest in press freedom and independent media with a moderate level of risk via a conventional investment, said Vontobel in a statement on the launch of the new fund.