Intech completes shift to alternatives ahead of downturn

Intech has completed a major re-weighting of its investment trusts to alternatives with the introduction over recent months of six new strategies.

The shift, involving more than double the allocation to alternatives, from about 9 per cent to 19 per cent for the diversified trust, was initially flagged at the firm’s client conference in May. The transition was completed last month, the firm announced yesterday. The six new strategies are: . Alpha generating – global trading, multi-strategy hedge funds and equity market neutral . Alternative beta strategies – global listed infrastructure, global inflation-linked bonds and commodities. The shift was made in anticipation of less favourable conditions for markets, with lower real returns for growth assets expected. Daniel Needham, Intech head of multi-strategy, said many diversified funds were too heavily weighted towards equity risk. “;Furthermore, the addition of alternatives via hedge funds of funds, with material underlying exposure to equity markets, defeats the purpose of adding alternatives strategies to these diversified funds. Even so, the allocations are generally too small to provide material diversification.”; Intech research shows that the percentage of negative returns by the average Australian super fund in periods when the share market went down was 74 per cent, between 1986 and 2006. More than 96 per cent of the average risk was attributed to traditional market exposures, with about 92 per cent being equity risk.