Pioneer Alternative Investments, part of the UniCredito Italiano Banking Group, has established the Momentum AllWeather Fund II, a multi-manager fund of hedge funds.
The original Momentum AllWeather Fund, Pioneer's flagship hedge fund product, was established in 1995 but closed to new business in June this year. This follow-up fund shares the original fund's low volatility investment approach and focus on risk management.
Pioneer says the objective of low volatility favours event-driven strategies so this will be the core strategy used. Satellite strategies will be used to help the fund deliver consistent returns even when the market changes.
PAI's investment team has four senior managers who have worked together since 1989. They will be responsible for portfolio management and asset allocation of the new fund. A due diligence team and analysts will assist the investment team.
Due to their experience in the hedge fund industry, they have built up relationships with the underlying fund managers. This can provide access to funds which are closed to new business and to new managers that are starting to receive attention.
A good relationship with the underlying managers also enables the investment team to assess the risks which come from practices such as leverage. According to Pioneer, leverage in itself is not risky, it is unpredictable events which can make it so. Understanding where the risk comes from is the best way to understand in what circumstances this could lead to losses and doing this enables the portfolio to be positioned to preserve capital as well as deliver absolute returns.
This fund may be suitable for high-net-worth investors who are looking for a fund which has no highs and lows. However, its success depends on Pioneer's ability to identify the right managers and strategies for that particular moment in the economic cycle and for the underlying managers to also get it right.