Old Mutual spectrum funds deliver strong risk-adjusted returns

Old Mutual Asset Managers (UK) (‘OMAM’) announces that its Old Mutual Spectrum Fund delivered a strong risk-adjusted performance in 2006, with the sterling share class returning 9.6% over the year with annualised volatility of 2.9%, giving a Sharpe ratio of 1.7 for last year.

The Fund has also started 2007 strongly, returning 1.9% in the first six weeks of the year. Old Mutual Spectrum Fund is a broadly market neutral multi-strategy hedge fund which offers investors access to a diversified portfolio of underlying strategies, similar to a ‘fund of hedge funds’ but instead utilising OMAM’s proprietary managed account platform, affording greater transparency and risk management.

Last year saw the diversification of the Spectrum range with the launch of three new funds, each with a different risk profile, but all using the same investment approach and managed account platform. In April 2006, OMAM launched Old Mutual Spectrum Plus Fund, a higher risk profile version of the Spectrum Fund, which has delivered a return since launch of 12.7% in sterling terms, equating to an annualised return of 15.4%.

There were two further additions to the Spectrum range in December 2006. The new funds, Old Mutual Spectrum Targa Fund and Old Mutual Spectrum Vista Fund, are both targeted at institutional investors and investment banks and offer specific risk targets and weekly liquidity. Old Mutual Spectrum Targa Fund has an annualised volatility target of 3% while Old Mutual Spectrum Vista Fund has a volatility target of less than 5%.

The Spectrum range of funds is managed by OMAM’s Multi Strategy Products team using a systematic, proprietary and highly risk-focused investment process to create an optimal portfolio of underlying hedge funds diversified by manager, strategy, style and region. The portfolios hold positions in a range of instruments including exposure to equities, bonds, futures, currencies and commodities. Underlying positions are held through OMAM’s managed account platform, which offers the investment team a high degree of transparency and control and enables portfolios to be managed within tightly defined risk parameters.

Richard Tomlinson, Head of Multi Strategy Products at OMAM, comments: “Our systematic, risk-budgeted investment approach has enabled the Spectrum funds to deliver strong risk-adjusted returns over the last year. We seek to deliver returns to our investors that are broadly market neutral and provide diversification from the broader equity and bond markets. 2006 was a strong year for our funds as we not only delivered strong absolute returns, but also managed to provide highly valuable diversification for our investors. Through the challenging month of May when global equity markets suffered a significant correction, our funds managed to make gains. We only suffered one down month through 2006 which was September, a month that saw the FTSE 100 up almost 1% and the S&P 500 up almost 2.5%, further demonstrating our market neutrality. We believe that the portfolios are well positioned to continue to deliver the expected level of return over the medium term, while constraining and managing the overall level of portfolio risk.”