UCITS Hedge Funds – Fund Raising Winners

By Kepler Partners LLP

Having previously focused only on alternative UCITS strategies with a UK registration, to reflect the increasingly global nature of alternative UCITS we have expanded the universe we analyse to include all alternative UCITS funds regardless of their domicile. By the end of 2013 the alternative UCITS sector now controls over £130bn of capital across 468 funds, marking another year of significant growth for onshore alternative funds.
 

FIG 1: ALTERNATIVE UCITS – FUND AND AUM GROWTH

Source: Hedge Fund Research, www.hedgefundresearch.com; Kepler Partners, www.absolutehedge.com

Looking more closely at the top asset raisers list of 2013, it does not look dissimilar to 2012 with Standard Life GARS retaining its top spot with asset growth of almost £5bn. When combining the £19.4bn in the UK OEIC with the £4.9bn in the Luxembourg SICAV this is comfortably the largest absolute return strategy in UCITS format. What is perhaps more impressive is that this growth was achieved despite a challenging backdrop – the fund’s performance struggled during the ‘taper tantrum’ of May and June, whilst SLI lost the strategy’s key architect, Euan Munro, who moved to Aviva. Other funds that must receive credit are the two new entrants into the top 5 list – Morgan Stanley Diversified Alpha Plus and Ignis Absolute Return Government Bond. Both funds exceeded their respective performance expectations in 2013 and enjoyed significant inflows on the back of this. When combined with extremely competitive fees, both funds represent the ‘triple whammy’ (cheap, liquid and strong performance) and investors have allocated accordingly.
 

FIG 2: TOP 5 ASSET RAISERS: OVERALL
Source: Kepler Partners, www.absolutehedge.com

Whilst 2013 was a good year for big funds (which got even bigger) it was also a good year for new launches which saw the best levels of support for a number of years. It is no surprise that equity long/short managers dominate this list with Schroder GAIA Sirios comfortably topping the list with AuM reaching over £592m by the end of its first calendar year as a UCITS fund. We believe that there are several factors behind this strong growth. As a global asset manager Schroders have extensive distribution capabilities and channels, the fund is based upon an established offshore product with a long track record, and there was a distinct lack of US focussed equity l/s funds in UCITS format. Another prominent new launch last year was Cripin Odey’s Swan Fund which enjoyed good investor support. With a manager of this reputation and following, we would have been disappointed had he not featured in this list.

FIG 3: TOP 5 ASSET RAISERS: 2013 LAUNCHES

Source: Kepler Partners, www.absolutehedge.com

Figure 4 highlights the biggest relative asset raisers of 2013. To generate a representative list we only considered funds starting 2013 with £100m or more of AUM and then looked at their percentage asset growth for the year. Both of Marshall Wace’s UCITS products are represented in this list and given that they are priced towards the top of the UCITS peer group and only offer weekly liquidity, this represents a significant departure from the majority of flow which has been directed at cheap, daily dealt funds. Both MW funds performed strongly in 2013 as pair-wise stock correlations decreased. We also put much of the funds success down to the firm’s excellent reputation and long term track record. To us this suggests that investors are still willing to pay up for quality where justified. Fixed income replacements also received significant interest in 2013. This trend undoubtedly helped the likes of BlueBay Investment Grade Absolute Return Fund make both the top five and relative asset raisers lists.

FIG 4: TOP 5 RELATIVE ASSET RAISERS: 2013

Source: Kepler Partners, www.absolutehedge.com

A notable feature of the fund raising environment in 2013 was the ever increasing list of products limiting capacity and closing to new investors. Following several years of excellent performance and asset growth, James Hanbury’s Odey Absolute Return Fund shut its door to investors with assets of £925m. The Marshall Wace TOPS programme also neared capacity after the MLIS Market Neutral Fund raised £558m in 2013 and the MW Developed Europe TOPS Fund raised over £800m of new capital to reach £1069m in total. Another fund to announce its closure (to new investors’ capital) was the Henderson Credit Alpha Fund.
 

FIG 5: FUNDS THAT RESTRICTED ACCESS IN 2013

Source: Kepler Partners, www.absolutehedge.com. *Bulk of assets in Luxembourg domiciled BSF European Absolute Return

Kepler Partners is a UK-based fund research and distribution business. In the first instance please contact Georg Reutter via georg@keplerpartners.com or +44 (0) 20 3384 8794, or via www.absolutehedge.com