Allianz Global Investors has introduced its first portable-alpha open-ended fund for professional investors in Hong Kong, Taiwan, Singapore and Europe. The RCM Hong Kong Alpha Fund combines RCM's research-driven Hong Kong equity strategy with a futures overlay to extract alpha and deliver an absolute-return investment profile with diversifying characteristics, says Mark Konyn, Hong Kong CEO.
"Within certain segments of our client base there is a growing need for strategies that have a low correlation with major asset classes and that can deliver an absolute-return performance profile," he says. The idea is to use Allianz's stock-picking abilities to deliver a source of incremental return.
The new fund is domiciled in the Cayman Islands and is available only to professional investors such as funds of funds. It hedges the fund using Hong Hong market futures, and maintains a market-neutral net exposure, with most outperformance driven by picking stocks, says George Liu, head of quant analysis and overlay manager for the fund. "Risks are managed at the overall portfolio, industry, style and individual stock levels," he says.
Simulated performance from January 2002 to December 2004 suggests a compound annualized absolute return of over 15% with a Sharpe ratio of 1.49, versus portfolio beta of 0.13, Liu says. Tracking error is estimated at 8-9%. The minimum investment amount is $2 million. The fund has a management fee of 1% plus a 15% performance fee with a high watermark.