F&C launches Global Tactical Asset Allocation fund

F&C has launched a new investment fund which offers balanced mandates and multi-asset portfolios access to returns purely generated by Global Tactical Asset Allocation (GTAA) decisions.

The F&C GTAA Alpha Fund has been launched with €200 million of assets and F&C is now seeking to register the fund in a number of jurisdictions so that it can be marketed in F&C's key European markets. The launch forms part of F&C's three-year accelerated growth plan which will see new business initiatives focused in specialist and higher margin product areas.

F&C has developed a strong track record in GTAA for segregated client portfolios and has committed considerable resource to this skill set. The Group explains that the launch of a pooled product which utilises advanced investment and risk management techniques opens up access to that capability to a much wider universe of potential clients in a structure that is highly efficient and improves transparency and accountability.

The F&C GTAA Alpha Fund is managed by F&C's large Strategy team headed up by Paul Niven, Head of Asset Allocation. The F&C GTAA Alpha Fund has a remit to take both long and short positions in specific asset classes, including equities, fixed income and currencies. However, unlike a traditional asset allocation product where the portfolio physically buys and sells underlying assets, the F&C GTAA Alpha Fund uses derivative instruments such as futures, forward and swap contracts.

The fund is structured as a UCITS III Luxemburg registered SICAV fund with share classes denominated in three major currencies; the Euro, Sterling and the US Dollar. It has a target return of cash plus 8% pa net of charges with the cash benchmark depending on the currency of the share class selected. The charging structure on the fund includes a performance fee element.

Fernando Ribeiro, Head of Investments at F&C, explained the rationale behind the fund: "Balanced mandates and multi-asset portfolios have traditionally sought to derive added value through a combination of both stock selection and global tactical asset allocation. These two potential sources of alpha tend to be uncorrelated with each other, employing different methodologies and skill sets. They therefore efficiently complement each other as active components of an overall portfolio."

"What the F&C GTAA Alpha Fund offers investors is a source of return generated from macro, top-down decisions and the opportunities created by pricing inefficiencies among asset classes and markets without stock specific risk. It therefore separates GTAA from other sources of alpha allowing investors to improve the efficiency and diversification of their overall portfolio."

Paul Niven, Head of Asset Allocation at F&C, added: "Transacting in derivative contracts, rather than physically buying and selling underlying stock, is the most efficient way to gain exposure to various asset classes and global markets because of their high level of liquidity. The result is low transaction costs and high speed of implementation. This enables us to respond quickly to the opportunities that arise in fast changing markets and without the problem of disruption to underlying physical portfolio positions. Substantial cost savings can therefore be made for a typical balanced portfolio."

"The F&C GTAA Alpha Fund is also attractive to those pension funds increasingly engaged in relatively illiquid structures and asset classes such as direct property, private equity, hedge funds and Liability Driven Investment, since it enables them to diversify their portfolio returns in highly efficient areas."