The ongoing market crisis is driving alternative UCITS investors to the perceived safety of less market-oriented strategies such as global macro, fixed income and equity market-neutral strategies, according to a survey by European fund distributor ML Capital.
Global equity long/short strategies, which had seen a large increase in popularity over the last year, saw a significant drop-off as investors seek to reduce their exposures to directional strategies. Of the 51 respondents to the survey, who collectively manage more than 100 billion in assets, 28% said they planned to increase their exposures, down from 40% in the last quarter, and 30% said they planned on reducing it, up from 10% in the second quarter.
For European funds, the popularity of long/short strategies inched up to 21%, while almost 40% of respondents planned to reduce exposure, up from about 15% last quarter. In Japan, only 9% of respondents wanted to increase exposure, while 42% wanted to decrease.
The most successful strategy has been discretionary global macro, where 70% of respondents wanted to increase exposure and only 7% wanted to decrease. Systematic global macro and commodity futures adviser (CTA) strategies both saw 47% of investors wanting to increase exposure; however, these two strategies still only account for less than 10% of UCITS funds. A lack of well-established managers in the CTA field is a major concern for investors, ML Capital says.
Relative value funds have also increased demand, with 60% of respondents eager to increase exposure to fixed income strategies and market neutral strategies seeing a doubling in demand over the last three months to 41% looking to increase holdings.
Event-driven strategy demand remained flat, with more than 50% of respondents seeking to maintain their current exposure to both multi-strategy, distressed and merger arbitrage strategies. When ML Capital began the quarterly survey in 2011, demand levels were double the current levels at almost 60%. Distressed event-driven strategies were hit the hardest, with only 15% seeking increased exposure.
Alternative UCITS investment funds came about in 2002, when the European parliament liberalized investment strategies somewhat, allowing UCITS-regulated funds to use alternative strategies on the same level as hedge funds. Speaking to GCTV this February, Lisa Corvese, head of Global Business Strategy at PerTrac explained the investment niche that has grown from 5.4 billion at its outset to around 150 billion today.
(OS)