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James Williams, Hedgeweek

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Deutsche Bank survey shows that investor allocations to alternative UCITS have doubled year-on-year… ETF provider Source to launch first product in the US…

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London-based Source, one of Europe’s leading ETF providers, this week announced that it was launching its first product in the US. Source’s first investment product to be listed on the New York Stock Exchange is the Source EURO STOXX 50 ETF, which offers highly liquid exposure to the largest blue chip stocks in the Eurozone. 

The firm’s US launch is spearheaded by a management team of ETF veterans led by co-founders Ted Hood, CEO, and Peter Thompson, Chief Strategy Officer. They are joined by Executive Chairman Lee Kranefuss, an ETF pioneer and the architect of iShares, and Senior Advisor Richard Goldman, formerly CEO of Rydex|Security Global Investors and COO of Guggenheim Investments.
 
“Entering the US is the next step in the growth of our global business,” said Thompson. “We see a tremendous opportunity to deliver market-driven, value-added products to US investors and are excited about the opportunity to serve the US market.”
 
Lee Kranefuss added that as a global independent ETF firm, Source was unconstrained internally “and free to partner with the world’s leading money managers and other providers of investment content, while still enjoying the support of the largest financial institutions and trading firms. These partnerships put Source in a unique position to offer investors access to investment strategies to serve their needs that were previously unavailable and give world class managers exposure to an untapped audience.”
 
The Irish Funds Industry Association (IFIA) has said it welcomes the consultation by the Central Bank of Ireland (CBI) to enhance fund management company effectiveness and efficiency.
 
Part of the consultation
proposed that UCITS management companies (and self-managed UCITS) managerial functions will be rationalised to six. In order to ensure the availability of the necessary skillsets required to oversee these functions the CBI are relaxing their requirement to have two Irish resident directors. 
 
Firstly, the CBI is defining what Irish resident means (i.e. that a director will have to spend at least 110 working days in the country per annum). Secondly, it will be possible to replace one Irish resident director with a director who has the necessary competencies and who commits to making themselves available to the CBI if needed.

 
Pat Lardner, CEO of the Irish Funds Industry Association, said: “The funds industry in Ireland has achieved strong growth through a combination of excellent practices with pragmatic, proportionate and sound regulation. This new consultation from the CBI reflects a further evolution to ensure Irish investments funds and management companies continue to have efficient and robust oversight and governance procedures. We welcome this period of consultation on such an important subject, as well as the need for an appropriate transitional period once the guidance note is finalised. This will ensure boards have sufficient time to implement the new regime.”
 
A new survey published this week by Deutsche Bank has found that investor allocation to alternative UCITS has doubled, climbing to 43 per cent from 21 per cent last year. The survey – From Alternatives to Mainstream Part Two – follows on from last year’s survey and shows that the “liquid alternatives” industry (including ’40 Act alternative mutual funds in the US) is building significant momentum on the back of strong investor demand.
 
The survey found that almost three quarters of alternative UCITS investors plan to increase their allocations over the next 12 months. The investors driving this demand largely consist of private banks, private wealth managers, funds of funds and asset managers.
 
On the supply side, one quarter of managers who responded to the survey indicated that they plan to launch at least one new alternative UCITS product in the coming year. Since 2008, alternative UCITS have grown over 40 per cent on an annualized basis, compared to 13 per cent for the hedge fund industry and just 2 per cent for the wider European UCITS industry.
 
The survey forecasts that if growth rates remain constant, the alternative UCITS industry has the potential to grow to almost 30 per cent of the size of the hedge fund industry by 2019, up from 11 per cent today and 3 per cent in 2008. When compared to the size of the wider UCITS industry in Europe, it has the potential to reach roughly 14 per cent, compared to 3 per cent today and 1 per cent in 2008.
 
Fundamental equity long/short, event driven and global macro are the top three most sought after alternative UCITS strategies among global investor respondents over the next 12 months said the report.
 
GAM has launched a new absolute return fund for Eugene Morris, a quantitative specialist recruited earlier this year, reported Citywire Global this week.
 
The GAM Star Systematic FX fund targets annualized returns of 10 per cent and aims to exploit short-term mispricing in the currency markets. It has a volatility target of 8 per cent.
 
GAM said that FX “is unique in that end-clients seek to acquire it both for use as a medium of exchange and to profit from price fluctuations.
 
“Over short time periods, imbalances between these two types of trading create mispriced currency pairs. Algorithmic models and efficient execution techniques seek to benefit from the characteristics of the market structure by taking advantage of these pricing inefficiencies.”
 
Morris joined GAM in April from QFS, a boutique macro fund manager. He previously worked at Goldman Sachs and Marshall Wace.
 

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