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MAM fund opts for long volatility ETF

MAM Funds’ Midas balanced growth fund has recently used a long volatility exchange traded fund as an alternative to a short Eurostoxx ETF.

Fund manager Simon Callow says he wanted to partially short UK and US exposure because of concerns about equity markets.

Callow says the CitiGroup US Economic Surprise index, which he views as a good lead indicator of equity markets, had been rising over the past nine months but started to fall about five weeks ago amid concerns that US companies were likely to miss earnings targets.

The elections in Greece were another cause for concern in relation to equity markets.

These economic conditions prompted the team to short the FTSE 100 and S&P 500 indices using Deutsche Bank’s db X-trackers short ETFs. The team also wanted to short European exposure but did not want another short position ETF from the db X-trackers range, as it did not want too much counter- party risk from Deutsche Bank.

Instead, the team decided to invest in a long European volatility ETF. Volatility spikes up when equity markets fall, meaning a long volatility ETF produces the same effect as a short Eurostoxx ETF.

The team chose to implement the long European volatility trade through the ETF Securities/Bank of America Merrill Lynch IVStoxx ETF. This position has now been sold, enabling the Midas team to lock in a 20 per cent profit.

The Midas team has also added the Jupiter Japan income fund to its portfolio.



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To help you to keep up with the fundamentals of tax, retirement and financial planning, try answering these questions. QUESTION 1 Which of the following values is used in the calculation of a chargeable event gain on a single-premium life assurance policy that arises on the death of the life assured? A) The amount paid […]

IMA makes three proposals for absolute return sector overhaul

The Investment Management Association has outlined three options for the absolute return sector as part of its consultation. The asset manager trade body is considering redefining and dividing the sector and group the funds alongside traditional asset-based sectors. One option being explored is to sub-divide the existing absolute return sector indicating which funds are targeting […]

Sesame launches risk profiling tool

Sesame Bankhall Group has launched a new risk profiling tool for advisers using Barrie & Hibbert, Oxford Risk and software provider Iress. The tool, Risk Profiler, will use 18 psychometric questions, designed by Oxford Risk and four suitability questions from Sesame to help evaluate risk tolerance. Iress is used to produce tailored client reports, explain […]

William Littlewood “betting that QE won’t work”

Journalist Alexis Xydias interviews Artemis manager William Littlewood about his views on bond, equity and currency markets and the impact of a Greek exit from the EU. With bond yields at “ludicrous” levels, William believes a tipping point for bond markets is sure to come. As a result, his Strategic Assets Fund holds government bond shorts to the tune of 100 per […]


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