The Ucits III Oeic will allow investors to participate in a quantitative absolute return strategy that combines active and passive index management.
Privalto says the launch follows investor demand for a capital at risk version of its stabiliser capital protected funds.
Stabiliser will sit in the lower risk segment of the client’s portfolio in the protected guaranteed sector with the new tracker fund to sit into the IMA absolute return sector.
The fund will be linked to the performance of the BNP Paribas millenium 10 Europe series 3, sterling hedged total return index.
It is designed to generate a positive absolute return on an annual basis through alpha generation and low correlation with traditional markets as well as traditional absolute return products and hedge funds.”
The index covers a broad range of liquid assets including US, European, Asian and Japanese equities, commodities, real estate and foreign exchange and has the flexibility to short many of these assets.
The BNP backed fund offers daily liquidity with dealing at net asset value and no exit fees or bid-offer spread.
As with the capital protected range, credit risk to BNP Paribas is mitigated by the posting of G7 AAA bonds as collateral.
The fund has a minimum investment of £1,000 and is available a retail and institutional share class.
It will be available at launch on five of the major platforms and on all by the end of the year.
Unlike some of the traditional absolute return funds, the new fund will not charge any performance fee and has an 0.75 per cent to 1.5 per cent annual management charge.
Head of Privalto UK Sisouphan Tran says any strategies for future launches will depend on the feedback of the fund.
He says: “Even if people are scared of risk they tend to have a constructive approach to their portfolio. There is an increasing demand for protected products but in the meantime people still want to have exposure to the equity market and there is a real demand for absolute return funds.
“When you see quantitative asset management people think it’s a black box and a bit scary. We use quantitative strategies but we disclose our model so it’s a glass box where you can look and see exactly what’s happening in the fund which is totally different from an actively managed fund.”