The increasing acceptance of alternative investments is being reflected in the number of new products being launched into the Australian market.
The most recent example is Mariner Financial’s Collateralised Debt Obligation fund.
Also carving out new ground in recent times has been Deutsche Asset Management and Tricom Equities, which announced in mid-May they have joined forces to offer margin lending for fund-of-hedge-funds.
The new Mariner product, Mariner Enhanced Income Fund No 5, is targeted at wholesale investors and, according to the firm, provides an alternative source of low-risk fixed income return through accessing alternative asset class debt investments.
Mariner says the product will invest in structured investment in five-year floating rate notes but, unlike similar vehicles, will be capital protected by being collateralised with a portfolio of Australian bank or semi-Government securities rated AA- or better.
The Deutsche-Tricom product sees them co-distributing Deutsche’s Strategic Value Fund (SVF), Australia’s longest running fund-of-hedge-funds, to retail investors.
Deutsche’s Asia Pacific head of Absolute Return Strategies, Glenn Poswell, says margin lending for hedge funds, with such a low interest rate and high loan-to-value ratio, is a rare development.
“While margin lending for equities and other traditional assets is popular, margin lending offerings of hedge funds is just beginning to be recognised as a great way to achieve even higher returns with reduced volatility,” he says.
“For example, the volatility of SVF over the past 12 months was just over 4 per cent, compared to almost 11 per cent for the Australian Stock Exchange’s All Ordinaries Index,” Poswell says.
“Besides less volatility, the fund also offers consistent performance, having delivered positive returns in more than 83 per cent of the months since its launch in December 1999,” he says .
Assets under management in the Deutsche Strategic Value Fund throughout the past 12 months have increased by more than 30 per cent in this time to now total more than $290 million.
Poswell says hedge funds are continuing to gain momentum as retail and institutional investors alike shift increasing portions of their portfolios to alternative investments.
“Investors like the fact that well-managed, multi-manager hedge funds potentially add performance, diversification and risk reduction benefits to a portfolio,” he says
The Deutsche Strategic Value Fund is a multi-manager, multi-strategy hedge fund. The fund aims to deliver consistent medium-term returns with low volatility and low correlation to the broader equity and fixed income markets.
It achieves this by investing in a diversified range of relative-value and market-neutral strategies on a global scale.
