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Old Mutual Global Investors launches risk premia UCITS fund

Monday, November 28, 2016
Opalesque Industry Update - Old Mutual Global Investors (OMGI), part of Old Mutual Wealth, has today announced its intentions to launch the Old Mutual Style Premia Absolute Return Fund at the beginning of December.

The Ireland-domiciled UCITS fund will be the latest addition to the business’s suite of systematic liquid alternatives products, addressing demand from investors for portfolio-diversifying products that invest in strategies with uncorrelated returns to traditional markets. OMGI has significant experience in this space, currently managing £7bn in hedge fund strategies.

STAR will have a volatility target of 8% and aims to deliver positive total returns on a rolling twelve month basis, uncorrelated to bond and equity markets.

The strategy seeks to capture returns via exposure to a range of systematic investment styles, or style premia, generating long-term results across markets and asset classes. The core underlying styles are value, quality, momentum and carry, across equities, fixed income and currency asset classes.

In addition STAR utilises OMGI’s proprietary statistical arbitrage strategy, seeking to provide additional diversification benefits and downside protection during ‘risk-off’ environments.

The inclusion of this functionality is a significant differentiator to existing products, as its returns can exhibit low correlation to other style premia during drawdown markets. This should appeal to investors that are concerned about the crowding risk often associated with style premia products. STAR’s lead manager, Leif Cussen, has worked on OMGI’s systematic alternative products since joining the business in 2005, including co-developing OMGI’s statistical arbitrage strategy. Leif will be supported on the fund by Paul Simpson and John Dow as portfolio managers, both of whom have significant experience in developing and managing liquid alternatives products.

In addition to the management team, a style premia investment committee will provide an additional level of support, oversight and governance to ensure that the fund remains in line with customer expectations.

Leif Cussen, comments:

“STAR is designed to meet a growing demand for cost-effective systematic strategies. The fund gives investors access to the diversifying benefits of four core systematic styles across multiple asset classes. In addition, it utilises our proven proprietary statistical arbitrage capability to further enhance diversification and mitigate crowding risks typically associated with style premia exposures”

Donald Pepper, managing director of alternatives, adds:

“Old Mutual Global Investors has a strong heritage in managing low correlation alternatives, having launched its first quantitative equity market neutral hedge fund in December 2001. STAR is designed to have a very low correlation to traditional assets. We believe the strategy will be a good diversifier to market driven exposures in clients’ portfolios. Further, given its long/short orientation, we see the strategy as a complement to hedge fund strategies, but at a significantly reduced cost.”

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