US firm PanAgora Asset Management is targeting Australian institutional investors with what it says is an innovative approach to traditional investment, blending quantitative and fundamental strategies and employing a ‘risk parity’ approach that diversifies assets based on their risk profile rather than capital value.
PanAgora, which currently manages around $1 billion of funds for Australian and New Zealand based institutions, recently launched its first locally registered and domiciled fund.
The Dynamic Global Equity Fund saw more than A$500 million committed prior to its June launch, and PanAgora president and chief executive Eric Sorensen said the fact that all unit pricings and transactions are in Australian dollars would further appeal to local investors.
PanAgora is currently assessing local demand for its ‘risk parity’ investment style, and Sorensen said the signs had been positive so far as the style provided the manager with a key point of difference as it attempts to expand its presence here.
Assets in a risk parity fund are distributed according to risk, so rather than a typical diversified portfolio that may have a 60 per cent allocation to equities that contain 95 per cent of the fund’s downside risk, that risk is spread evenly across commodities, equities, fixed interest and bonds.
PanAgora’s risk parity funds are buffered against ‘black swan’ events such as the global financial crisis, recovered lost assets more quickly than traditional funds and had outperformed the world index over their lifetime, he said.
