A newly launched Ucits version of a Janus Henderson global absolute return fund has been deemed a tough sell in the current climate due to its “old hedge fund” pricing structure.
The Janus Henderson Global Multi Strategy fund will offer investors diversified exposure to alternative assets while seeking to minimise risk through separate portfolio protection strategies and will have minimal correlation with other major asset classes, a press release announcing the launch said.
Managed by David Elms (pictured) and Stephen Cain, who are based in London and Denver respectively, the fund aims to deliver positive absolute returns, regardless of market conditions, over any 12-month period by investing in equities, fixed income, derivatives and commodities. It will target cash +7% per annum, before the deduction of charges, over any three year period with volatility of 4-8%.
The strategy, which currently exists as a Cayman Islands-domiciled hedge fund, will be primarily sold to retail and institutional investors in Europe, Asia Pacific and Latin America.
Elms stressed the portfolio protection element of the fund as key in navigating volatile markets like during the coronavirus sell-off. “Diversification works well in up markets but is unreliable in down markets, like March 2020, when investor panic and liquidation induces correlation and all risk assets fall in a synchronised manner.
“We address this issue by running a diversified set of protection strategies that aim to provide positive returns in down markets and are the mirror image of the diversified ‘risk on’ strategies we use to generate returns in normal markets.”
One fifth or 24 of the 117 funds in the IA Targeted Absolute Return sector have produced a positive return since the coronavirus sell-off kicked off on 20 February, according to data from FE Fundinfo.
‘It certainly is priced like an old hedge fund’
Chelsea Financial Services managing director Darius McDermott said though the fund’s cash +7% target is “punchy” after factoring in fees “it doesn’t look particularly cheap” and could be a tough sell in the UK retail space in the coronavirus climate. “It certainly is priced like an old hedge fund at ‘two and 20’.”
Shareholders in the clean retail share class will pay a 1.0% annual management charge on top of a 20% performance fee.
McDermott reckons high fees are to blame for absolute return funds’ lacklustre returns. Net of fees the IA Targeted Absolute Return sector average is –0.15% over three years and 3.57% over five years.
Coronavirus creates interesting opportunities for event driven strategies
But Tilney managing director Jason Hollands said the timing of the launch seems sensible, noting dispersions between valuations across sectors and restructurings following the coronavirus volatility have created interesting opportunity sets for event driven strategies.
“Given the quantum of stimulus, from here you want to be long-risk assets on a medium to longer term view,” Hollands said.
“However, some pullbacks on the way are inevitable an allocation to absolute return funds will still make sense for many investors.”
An event driven approach is one of six strategies the Janus Henderson Global Multi Strategy fund will focus on depending on the market environment. The others include:
-Convertible arbitrage: aims to capitalise on mispricing of convertible bonds
-Equity market neutral: seeks to deliver alpha by investing long and short across pan-European equities
-Price pressure: aims to generate returns through the provision of capital to liquidity opportunities
-Risk transfer: looks to capitalise on supply/demand-driven imbalances in the derivatives market
-Portfolio protection: seeks to mitigate left tail risk through a multi-faceted protection strategy
