Investors have welcomed Schroders becoming the latest fund house to expand into US long/short equities shortly after Man GLG stated it was looking to make a similar launch.
Schroders has partnered with US manager Nuveen to launch two existing strategies with assets totalling $1.2bn to UK investors via its alternative Ucits platformd.
The funds will be managed by US equity veteran Bob Doll and his deputy Scott Tonneson, supported by fundamental and quantitative analysts.
Schroder Gaia Nuveen US Equity Market Neutral and Schroder Gaia Nuveen Equity Long Short will be focused primarily on large-cap US equities, offering daily liquidity without a performance fee.
Schroders’ Gaia platform has 11 strategies and $6.2bn AUM in total.
US long/short trend
Last week, Man GLG poached Mike Corcell from RWC Partners to develop a US long-short equity strategy that could provide a welcome rival to William Warren’s funds at Artemis, which until recently were run by Stephen Moore.
Willis Owen head of personal investing Adrian Lowcock thinks US long/short launches could become a trend. “I would expect the larger fund groups with an existing US fund to be the most likely candidates, JPM, Blackrock and Fidelity all have resources to run a long/short funds.”
Lowcock said: “The bull market in the US is looking old and the economic cycle is clearly in the late stage, which means although this phase can last a long time and markets can continue to perform there could be rotation in the market.”
There are some very big differences in valuations between growth and value, he added. “A long short fund can offer the exposure to the equity market whilst looking to get some protection from sell-offs during this phase.”
Caution on absolute return managers
There has been limited choice for high quality long/short managers in the UK market, according to AJ Bell head of active portfolios Ryan Hughes.
“With US equities close to all-time highs and many commenting that we may be close to the end of the cycle, it seems absolute return managers may be positioning themselves to capitalise on demand for lower risk strategies,” Hughes said, adding: “As we have seen over recent years, running absolute return is a particular skill that few managers have and therefore investors should look carefully at the capability to ensure the managers have the skills required to successfully short companies and balance risk in the portfolio.”
“With these launches, Nuveen is bringing an existing capability to the UK and therefore prospective investors will be able to test the capability with real performance data.”
