Are sub-advisory deals the new way to enter the absolute return UCITS space?

Thu Nov 3, 2011

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What does the partnership between Skandia Investment Group and Aspect Capital mean for the absolute return UCITS industry?

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Comment by Joy Dunbar, Editor of Absolute UCITS

Since the development of absolute return UCITS funds, platforms have been the most prominent way that hedge fund managers have accessed investors outside their non-traditional core.

The benefits of using a platform—assuming all platforms are born equal (which they are not)—are clear. Platforms offer a portfolio manager a one-stop-shop solution to distribute and market its funds.

The platform is usually legally in charge of the fund so it is its responsibility to deal with the extensive regulations surrounding the UCITS world.

These days, such managers may only have 'star quality’ within the close-knit offshore sector, so going onto a platform gives the portfolio manager the opportunity to associate themselves with a strong brand.

But in addition to launching a UCITS fund solo or going via a platform, this week saw another way of distributing an absolute UCITS fund appear: the sub-advisory relationship.

Commodities trading advisor, Aspect Capital, which manages $6 billion assets, was appointed by Skandia Investment Group to launch a managed futures UCITS fund ( see earlier story). The mutually beneficial sub-advisory relationships with brand name managers are common in the retail fund world where the expertise is lacking, but the distribution channels are solid.

The Skandia Global Futures Fund could become the poster child for managers wanting to create UCITS funds in new ways. Aspect is not mentioned in the title of the fund and references to the term hedge fund—which seems to scare the average retail investor—are kept to a minimum in the literature. Managed futures or futures are the terms used instead.

SIG, one of the largest investors in the absolute return UCITS space, has been one of the very few retail investment groups to embrace hedge funds openly and has used many traditional offshore managers, such as Odey Asset Management, Liontrust Asset Management and Danske Capital, for its Best Ideas funds.

In an uncertain investment environment offshore and onshore alliances need to continue to ensure a greater choice of funds have the potential to beat inflation and cash. Mixing the best in asset management manufacturing and distribution seems like a solid way forward.  



ISSN: 2151-1845 / CDC10004H

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