-
Objective
-
The strategy aims to achieve positive returns during periods of significant decline and/or high volatility in global equity markets. However, positive returns are not guaranteed and a capital loss may occur.
-
Performance benchmark
-
The strategy is actively managed, and no benchmark is used for portfolio construction or performance comparison.
-
Strategy inception
-
21 June 2024
-
Investment policy
-
The strategy:
- Primarily invests in derivatives through entering a series of total-return swap transactions, providing exposure to systematic trading strategies.
- Uses systematic trading strategies that include three components: hedging strategies, diversifier strategies and trend strategies.
- Uses hedging strategies to potentially provide upside when equity markets experience significant declines and/or high volatility.
- Uses diversifier strategies with the aim of reducing the cost of implementing systematic protection, without overly reducing hedging reliability.
- Uses trend strategies based on price trends over time, which are often defensive in nature.
- Holds investment grade fixed and floating-rate corporate and government money market or cash equivalent instruments to primarily provide collateral to support derivatives exposure and to help cover the cost of implementing hedging strategies in the strategy through the underlying yield on these assets.
- Invests on a global basis.
Strategy highlights
- A diversified hedging strategy, providing a consistently defensive profile to global equities
- Reliably convex behaviour – a hedge without foregoing equity upside participation through punitive costs
- Systematic combined with active management provided by experienced practitioners
- Supports a range of differing objectives and seeks improved risk-adjusted returns
Note: The strategy is intended to be used as a diversifying overlay to an investor’s other investment exposures. Therefore, it is important to note that this strategy is designed to be a complementary holding and not a core holding within an investor’s portfolio.
Note: The strategy will invest principally in financial derivative instruments (FDI) and will use FDI for investment, hedging and efficient portfolio management purposes.
Due to the nature of the strategy, the strategy is likely to experience losses when global equity markets are flat or rising and/or volatility is low or declining.
Investment team
The strategy is managed by an experienced team of investors, from across our multi-asset and absolute-return teams. The team has significant experience in the structuring and implementation of both tactical and systematic hedging, along with experience in investing in a broad range of quantitative investment strategies.
Want to find out more?
Your capital may be at risk. The value of investments and the income from them can fall as well as rise and investors may not get back the original amount invested.
Key investment risks
- Objective/performance risk: There is no guarantee that the strategy will achieve its objectives.
- Derivatives risk: Derivatives are highly sensitive to changes in the value of the asset from which their value is derived. A small movement in the value of the underlying asset can cause a large movement in the value of the derivative. This can increase the sizes of losses and gains, causing the value of your investment to fluctuate. When using derivatives, the strategy can lose significantly more than the amount it has invested in derivatives.
- Changes in interest rates & inflation risk: Investments in bonds/money market securities are affected by interest rates and inflation trends which may negatively affect the value of the strategy.
- Credit ratings and unrated securities risk: Bonds with a low credit rating or unrated bonds have a greater risk of default. These investments may negatively affect the value of the strategy.
- Credit risk: The issuer of a security held by the strategy may not pay income or repay capital to the strategy when due.
- Emerging markets risk: Emerging Markets have additional risks due to less-developed market practices.
- Counterparty risk: The insolvency of any institutions providing services such as custody of assets or acting as a counterparty to derivatives or other contractual arrangements, may expose the strategy to financial loss.
