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Bringing you news, views and analysis since 2013
James Williams, Hedgeweek

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Goldman Sachs Asset Management adds fixed income fund to its SICAV structure… Source lists EURO STOXX Optimised Banks UCITS ETF…

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Source this week announced the listing of the Source EURO STOXX Optimised Banks UCITS ETF on the London Stock Exchange. The fund provides exposure to banks within the Eurozone and is optimised to reduce exposure to illiquid stocks.

Michael John Lytle, Chief Development Officer, said that the results of the European Central Bank’s Asset Quality Review have shed light on the health of the region’s banks as well as the broader European economy. “For investors who want to increase their exposure to Eurozone banks, this ETF provides the opportunity to gain access quickly and efficiently. It is the second banking sector ETF that Source has listed on the LSE, following the Source STOXX Europe 600 Optimised Banks UCITS ETF, which differs because it includes UK banks. Both ETFs trade throughout the day and the holdings and counterparty exposures are published daily on our website, providing total transparency,” said Lytle.
 
The fund aims to provide the performance of the EURO STOXX Optimised Banks EUR Index (Net Return) through Source’s efficient and transparent swap-enhanced structure. Source’s innovative approach of using multiple counterparties for the swap contracts aims to diversify and thereby reduce counterparty risks, while also minimising the ETF’s tracking error.
 
Another ETF listed on the LSE this week was the UBS (Irl) ETF plc MSCI UK IMI Socially Responsible UCITS ETF from UBS Global Asset Management. This is the sixth in a line of socially responsible ETFs launched by UBS GAM that tracks the MSCI Global Socially Responsible (SRI) Indices covering emerging and developed markets. It follows the September listing of the UBS ETF MSCI Emerging Markets Socially Responsible UCITS ETF. The TER of the ETF is 0.28 per cent.
 
This latest ETF will track the MSCI UK IMI Extended SRI Index which targets companies with high Environmental, Social and Governance (ESG) ratings relative to their sector peers and excludes companies inconsistent with certain values-based criteria. The index is made up of large-, mid- and small-cap segments of the UK market.
 
Andrew Walsh, Head of UBS ETF Sales UK & Ireland, commented: "With this UK market-focused SRI listing, we continue in our commitment to offering ETFs which enable investors to access those companies which meet rigorous environmental, social and corporate governance standards in an easy to access structure."
 
Goldman Sachs Asset Management has launched an alternative fixed income fund to generate income streams to investors irrespective of market direction. As reported by International Adviser, the Global Strategic Macro Bond Portfolio reflects the GSAM global fixed income team’s views on global interest rates, currencies and emerging market debt with the aim of generating long-term absolute returns.
 
Nick Phillips, head of GSAM’s international third party distribution business, was quoted as saying: “Many of our clients have significant exposure to credit and therefore seek solutions with less emphasis on that sector while aiming to provide exposure beyond traditional asset classes.”
 
The new fund is a sub-fund of the UCITS-compliant Luxembourg-domiciled Goldman Sachs Funds SICAV and will be managed by the GSAM global fixed income and liquidity management team.
 
Lombard Odier Investment Managers (LOIM) has built a long/short strategy across asset classes aimed at improving risk-adjusted returns with a low correlation to traditional investments.
 
LO Funds – Alternative Risk Premia, a long/short fund, is designed to help in today’s environment of declining markets and uncertain prospects, where investors find the search for returns increasingly hard.
 
By applying an Alternative Risk Premia approach with the ability to go systematically long and short, LOIM offers investors a strategy aimed at enhancing risk-adjusted returns from traditional asset classes in a stable way within an investment structure that aims to provide robust portfolios, irrespective of how markets perform.
 

 
“Alternative Risk Premia used to be available only from hedge fund firms,” said Carolina Minio-Paluello, deputy chief investment officer of LOIM. “We can offer similar benefits for investors’ portfolios in a cost-effective and systematic way. Our teams have the expertise and experience to implement long/short strategies using these techniques.”
 

 
An example of an income risk premia is ‘carry credit’ which aims to exploit the yield difference between the investment grade and high yield corporate universes. In unchanged market conditions, investors may benefit from the higher credit spread of the high yield. A trend premia uses momentum signals within defined time frames to take long or short positions in a diversified set of assets.
 

 
“Five years ago we developed a risk-based portfolio construction infrastructure, initially for long-only, diversified smart beta,” added Alexandre Deruaz, head of smart beta solutions at LOIM. “We can now also apply it to our long/short approaches.”

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