Barclays Global Investors (BGI) has proactively sought to convert long-only mandates from institutional clients to its 130:30 strategies in both Australian and international equities, resulting in a number of clients making the transition, Investment & Technology understands.
The transitions to the quantitative alpha extension funds were not part of an orchestrated distribution strategy but had emerged from discussions with clients about their investment objectives and risk thresholds, Will Britten, head of institutional business at BGI, said. “It’s not a blanket statement in which we’re saying to clients: ‘You should adopt this’. The strategies should work with their objectives,” Britten said.
“The key consideration is that BGI is an investment solution provider for a variety of risk and return targets…It’s a client-by-client, consultant-by-consultant process."
“It’s about sharing ideas, and that doesn’t constitute a strategy.”
According to the most recent Mercer Sector Surveys, the median domestic long/short equity fund outperformed its long-only counterpart in one, two and three year periods ending in May 2008, posting -1.1 per cent, 14.3 per cent and 19.0 per cent against -5.9 per cent, 11 per cent and 16.7 per cent respectively.
One argument in favour of 130:30 funds is that they make an equities exposure work harder by increasing the range of positions available to a manager, yet retaining the beta desired by the client. For a manager like BGI that is at or near capacity in most of its strategies, converting long-only to 130:30 could also be a way to generate extra performance fee income from the same funds under management.
The 130:30 strategy run by Plato Investment Management, a quantitative boutique established by Don Hamson, who launched State Street’s first long/short vehicle, is another active extension fund that has attracted further interest. After being seeded by a Russell multi-manager product last year, the fund was recently included in the $9 billion ING Investment Management Wholesale Australian Shares OptiMix portfolio, and won an $11 million mandate from the Sisters of Mercy Staff Superannuation Scheme.
See the cover story, Alpha extension: quants and quals strive for the top, beginning on p.17