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It is based on the same principles as the companyÆs long-only strategies, which typically target excess returns of up to 4% depending on risk profile. The new fund will target higher tracking error while maintaining as low a risk profile as possible.
David Schofield, London-based president of IntechÆs international division, says the fund is likely to find favour among Hong Kong pension funds and Japanese institutions.
ôInvestors are demanding more alpha,ö he says. ôIf you try to use an existing process, tracking error usually increases, and because of this we decided to relax our no-short policy. Other asset managers have used long/short strategies of 130/30 or higher but our level of shorting is determined by the investment process.ö The fund targets beta and information ratios of 1.
The portfolio is æchosenÆ based on the stochastic modelling process developed by former Princton University professor Robert Fenholz in the 1980s. The process, which is run on a weekly basis, identifies stocks with higher volatility than the Russell 1000 index and low correlation. This, Schofield says, leads to an annual portfolio turnover rate of between 60% and 90%. In IntechÆs long-only portfolios this is lower than might be expected, he adds, because a stockÆs price must move below a percentage threshold of its optimum price before it is rejected.
In a separate development Janus Capital, which owns an 83% stake in Intech, has set up shop in Australia. The office will be managed by John Laundau, a former CooperÆs & Lybrand accountant who will report to Ilex Lam, regional director for Asia Pacific ex-Japan. Janus says it is targeting superannuation schemes, government funds and investment consultants.
The office will sell both Janus and Intech strategies, including IntechÆs US enhanced index, large cap core, growth and value capabilities. It will also market the firmÆs recently introduced product for international equities, which the firm expects will be in most demand among Australian super funds and other institutions. ôThe pension market in Australia is very large [approximately A$1 trillion] and accepts quant strategies,ö he says.
The AU$85 billion ($61.6 billion) Australian super fund has some exposure to indebted property developer Evergrande. Meanwhile, China’s construction finance is part of its core strategy in real estate.
Investors are seeing the risks, but also the opportunities of the logistics sector. Warehousing their fears for the moment, they can see it's a good conduit to high-growth assets.
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SGX’s new framework for Spacs will likely provide investors with a much-needed channel for direct deals, but the verdict is still out on whether it will bring liquidity to the bourse.