View more on these topics

Skandia takes alternative view

Skandia has introduced a fund of funds that invests entirely in a range of alternative asset classes.

The Skandia alternative investment fund aims for growth by investing in 10 funds, each representing an asset class or theme such as commodities, water and infrastructure. It also invests across various alternative investment strategies that are commonly used by hedge funds.

Hedge funds have a low correlation to traditional assets such as equities and bonds, but Skandia observes that they are often seen as unsuitable for retail investors due to high fees, a lack of transparency and not being regulated.

Skandia’s fund uses a fund of hedge funds replacement strategy through the Fulcrum Alternative beta plus fund.This fund offers the benefits of funds of hedge funds within a transparent and regulated Ucits III format. Skandia says this structure also costs less than a fund of hedge fund.
Market inefficiencies are exploited through equity market neutral, currency and volatility strategies through JPM highbridge, Morgan Stanley FX alpha plus and Commerzbank UK Premia respectively.

Skandia’s portfolio also has exposure to global macro through Aviva Morley absolute TAA 5. Other investment themes are played out through Lehman commodity plus, KBC eco water, TG rare infrastructure, BlackRock gold & general and BNY Mellon passive investment, a timber fund.

Many of the underlying funds are usually available only to wealthy and institutional investors. Skandia will provide access to these funds for retail investors by blending all the themes and asset classes in a way that should achieve positive returns in different market conditions. Blending the portfolio will balance out the risks associated with each individual investment.

To select the underlying investments, Skandia’s investment team analyses at the characteristics of the funds, not just the past performance. It looks for managers whose performance can be attributed to skill rather than luck. Funds are chosen which blend well with the others in the portfoilio and are continuously monitored in line with the usual Skandia multi-manager process.

The portfolio will be rebalanced to the target weight of 10 per cent in each asset class to ensure diversification. Investments that have become a bigger part of the portfolio because they have performed well will be trimmed, while those with weightings that have fallen below 10 per cent will be topped up.

This fund is likely to appeal to investors who already hold traditional asset classes and who are looking for diversification in a risk-controlled portfolio.

However, the fund will contain funds that have fairly sophisticated investment strategies that some investors may not understand or feel comfortable with. Skandia must also ensure the underlying funds keep to their objectives and risk parameters, as any deviation could have a negative impact on how the funds work together in the portfolio.

Recommended

A shaw thing

Annie Shaw is a freelance financial journalist
The week started with a quick snifter with the journalists’ group my husband calls “the witches’ coven”, that I have been admonished for calling “the agony aunts” (not all are female) and which is in fact a group of senior freelance journalists, many, but not all, of whom are newspaper consumer champions, who like to chew the fat and put the world to rights once a month.

Singapore cover image - thumbnail

White paper — Singapore International Insights

Jelf Employee Benefits assesses key trends within the international private medical insurance provision of organisations with employees in Singapore. Benefit structure, cost management and healthcare facilities are examined and key considerations are highlighted. This edition will be of particular interest to global human resource directors and benefit managers with local and expatriate populations in Singapore.

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