Hedge Funds Review European Fund of Hedge Funds Awards 2015
"What differentiates us is the length and breadth of experience in the managed accounts market," says Martin Fothergill, global head of liquid alternatives at Deutsche Asset & Wealth Management (AWM), which was one of the first to launch a Ucits managed accounts platform (MAP) in 2008 and four years ago started offering alternative ‘40 Act funds.
Judges at this year's Hedge Funds Review European Fund of Hedge Funds Awards deemed Deutsche AWM's Liquid Alternatives Platform to be the best MAP. It launched its first MAP in 2002 and introduced an unfunded component two years later. Investors can thus gain an unfunded exposure, rather than an upfront investment, to managers that trade margin strategies.
The company has also moved with the times as institutional investors have gained clout, ditching the old MAP model of picking and selling suggested funds to clients. Its recommendations are now tailored more to client demand these days, the team admits.
Its MAP offers 12 different hedge fund strategies and exposure to about 170 different managers, funded and unfunded, including 12 Ucits funds. It has brought in strategies other MAPs and Ucits platforms have not "embraced", as Manos Chatiras, head of liquid hedge funds puts it, such as statistical arbitrage and convertible arbitrage, which could stand Deutsche AWM in good stead in coming years as non-directional strategies grow in popularity.
"Twenty-four months ago we made a very strategic decision to concentrate our effort into selecting relative-value hedge fund strategies," says Chatiras. Deutsche AWM is upbeat about equity market neutral and, in the event-driven sector, favours merger arbitrage over more directional special-situations strategies. Indeed equity market neutral was boosted by recent market volatility and the stock-picking environment in the third quarter of 2015.
Such hedge funds are favoured in current conditions when market direction is difficult to call. "We have found these strategies to be very popular with our investors and aligned with their own macro views," says Fothergill.
The prospects for global macro funds are also promising as world monetary policies diverge, Deutsche AWM thinks. So far performance has been disappointing for many funds, but most investors want to allocate to that area, Fothergill says. "There's very good reason to invest in it from a top-down perspective, but with the exception of a few it's actually quite difficult to find managers that are performing [well] in that space," he says. He blames geopolitical moves that they got wrong.
Deutsche AWM also seeks to take its hedge fund business down a new path. It launched its first internal hedge fund in January, specialising in insurance-linked securities, and aims for this to be first of many. "We hope 2016 will be the year we expand our internal hedge fund capabilities by bringing more strategies in to the market," Chatiras says.