Pengana Capital’s global volatility fund – the first of its kind in Australia – has been seeded with a $150 million mandate from an unnamed institution.

The launch of the fund follows the recruitment of Alvin Wilkinson in March. The former director of the Chicago Board Options Exchange (CBOE) designed the Pengana fund and will manage its underlying strategy. Wilkinson said last week, after the fund picked up the ‘Innovative Product of the Year’ award at the annual S&P funds management awards, that the fund was in development for two years with the seed investor. The fund is designed to capitalise on changes in market volatility, initially in the S&P 500 index and, progressively, extending to major indices in other markets. Volatility funds represent a very recent phenomenon in Australia and so far tend to be the domain of investment banks and hedge funds operating in the high net worth market. They can provide a hedge against big market gyrations, such as has occurred globally since July, and tend to be uncorrelated to traditional investments. Wilkinson was involved in the development in the US of the so-called ‘Fear Index’ – the CBOE Volatility Index – which has become a popular measure of the implied 30-day volatility of the S&P 500 index options.

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