View more on these topics

SVM gets to the long and short of it

SVM Asset Management has brought out a UK equity fund that will use shorting techniques through derivatives to benefit from falling share prices.

The SVM UK absolute return fund was launched in response to long-only portfolios not having the investment tools to produce positive returns as markets struggle with the global economic downturn. Under Ucits III, this fund can benefit from share price falls through a form of short selling.
Short selling is where fund managers make a profit by borrowing shares, selling them and buying them back when the price has fallen. Ucits III does not allow fund managers to short securities directly as hedge funds can, but the same effect can be achieved using derivatives. This is known as synthetic shorting.

Returns will also be generated in the usual way, by holding companies with share prices that are expected to rise. These will be selected through detailed analysis and may include firms such as AstraZeneca. This was lowly rated at the start of 2008 but has performed well.

On the short side, ideas may be generated from research on the long side of the portfolio. They may be stocks that have been sold from the long portfolio as they have become overvalued, or where earnings downgrades or balance sheet problems are expected.

Lead manager Colin McLean founded SVM in 1990 and has over 30 years’ investment experience. This includes 16 years running long/short portfolios, which means he has experience of managing long/short portfolios in bull and bear markets.

The new fund is based on the SVM Saltire, a UK long/short fund launched in 2002. SVM Saltire aims to capture around 80 per cent of the upside in a rising market and SVM says it has never had a 12 month period in which it lost money for investors.

This may provide some comfort to advisers who feel that an absolute return fund would be useful for clients, but who are concerned about the synthetic shorting ability of some fund managers. However, as with all absolute return funds, there is no guarantee that it will produce positive returns at all times.


MPs should look again at evidence

I sent my first evidence to the Treasury select committee on February 6. The following Tuesday, February 10, Lord Stevenson, the ex-HBOS chairman, and Andy Hornby, the former chief executive, were cross-examined by the committee about my evidence and denied my allegations.


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    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