View more on these topics

Long look at short concept

“Short extension” strategies, or 130/30 funds, are a relatively new concept for the British investment market. They have existed in America for the last few years, with groups such as State Street, Mellon and Barclays Global Investors cited as the main players.

Initially, 130/30 strategies were used for institutional investment only and were quantitative in style. Gradually, however, they have spread into the retail market and are attracting fundamental managers.

With the added flexibility allowed by Ucits III, many argue they will take off in Britain. The introduction of Ucits III has enabled managers and fund groups to use a much wider range of instruments and structures. This year will see a number of groups launching 130/30 funds in Britain. They include UBS, F&C, Cartesian, Fortis Investments and JP Morgan (JPM). JPM launches its US 130/30 fund this week and will launch its Euro select 130/30 later this month. What do the Adviser Fund Index panellists think of 130/30 funds? And will they invest in them?

A 130/30 fund uses a hybrid of long-only and long/short positions. It retains market neutrality by reinvesting the proceeds from its short positions into long only investment. Any short positions taken are matched by adding long positions, ensuring the fund is 100 per cent net long. So if 30 per cent is shorted, 130 per cent is long.

Ben Willis, head of research at Whitechurch Securities, however, says he is “not 100 per cent convinced” by the concept. As with other AFI panellists, he says he needs to do more research.

“It is definitely an area we will look into,” he says. “We need to do more research. They are a blend between hedge funds and long-only funds. It could be the next big investment theme in the market.” Willis adds that if he does use 130/30 funds in his AFI portfolios he would initially position them in the cautious and balanced indices.

Jonathan Wallis, head of retail fund research at the Allenbridge Group, also wants to look at the strategy in more detail. “I am wary of any fund that is a new structure like this,” he says. “The theory sounds great but it depends on the individual fund. They could be used to reduce risk or gear up risk. At the moment, most seem to be aiming to reduce it.”

Charles Stanley investment manager Shauna Bevan says innovation is welcome. “We would look at any strategy that we think is appropriate,” she says.

Overall, the view is that 130/30 funds are welcome but panellists need to know more about the individual mandates and see how they perform.

Recommended

Split decisions

This week, I am returning to a subject which I addressed some years ago, since when there have been significant and important developments about which I believe financial advisers must be aware. The subject is pensions and divorce.I will start by going back to basics. The question of a divorced person’s rights to benefit from […]

Power failure at FOS

Two recent High Court cases highlight the £100,000 straitjacket restricting ombudsman decisions, says independent compliance consultant Adam Samuel.

Baring calls for shift to fully funded schemes

Baring Asset Management is proposing the creation of a fully funded public sector pensions system to cover civil servants, the NHS, teachers and the armed forces.It would be based on successful schemes such as the Dutch public sector workers’ scheme ABP and the California public employees scheme Calpers.Barings director of fixed income Toby Nangle believes […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com