AMP Capital and GAM are developing a high-volatility version of GAM’s systematic alternative risk premia portfolio, in an example of how asset managers and owners can work together to meet customer demand.
AMP Capital uses absolute return and risk premia offerings as building blocks in its multi-manager portfolio, and wanted a higher volatility option to complement other strategies.
GAM will create a high-volatility version of its alternative risk premia strategy, targeting volatility of 10-12 per cent, versus 6-8 per cent in its flagship fund. AMP Capital will seed the strategy with a $135 million mandate.
AMP Capital portfolio manager Celine Kabashima, who looks after alternatives, said the mandate was a result of growing demand for risk premia offerings, and that AMP Capital’s existing offerings were at capacity.
“It’s an additional building block,” Kabashima said. “We wanted to offer more options for our internal investment team to pick and choose from. GAM was able to create a higher volatility product that met the needs of our portfolios and we seeded it for $135 million, with more assets to flow in.
“It’s essentially a new trust that’s open to other investors as well. It’s not exclusively for AMP. It’s a co-mingled unit trust.”
AMP Capital turned to GAM due to its long-standing experience with alternative sources of alpha, which typically target value, momentum and carry strategies.
GAM’s head of alternative risk premia, Lars Jaeger, says GAM’s investment strategy has the potential to generate performance patterns that so far have largely remained uncaptured, or been accessible only to the most sophisticated hedge fund managers.
“The team at GAM has more than 13 years’ experience in building and executing alternative risk premia strategies,” Jaeger says. “In our investment process, we allocate capital across our portfolio, based on each individual component’s expected drawdown, rather than based on volatility. Overall, this gives us a more stable portfolio and one that is more protected in extreme market conditions.”