Salient Partners has launched the Salient Alternative Beta Fund, which aims to seek long-term capital appreciation by investing in asset classes with low correlations to traditional stocks and bonds.
The fund primarily makes long and short investments in futures and forward contracts, but may also invest in securities, derivatives and other financial instruments in order to obtain extra diversification.
"Investors in alternative investment strategies have generally gravitated toward lower volatility investments that exhibit return patterns that are more correlated with traditional equity markets, but this fund goes against the grain by attempting to diversify away from equity-centric exposure while utilising high volatility," says Lee Partridge, Salient’s chief investment officer. "This is the latest step in our strategy to bring cost-effective and rules-based alternative investment solutions to a wide variety of investors."
The fund tracks alternative betas, non-traditional market exposures based on chronic investor biases which can be used to generate potential return streams. Alternative betas, which include size, value, carry and momentum, may provide positive returns and diversification over the long term because they are liquid, scalable and differ from traditional market exposures.
The fund, which offers a competitive annual management fee of 0.95 percent of its average daily net assets, targets a constant volatility level of 20 percent for the complete portfolio. To further balance risk across the portfolio, investments are evenly divided between divergent strategies, which can become negatively correlated to equities during increases in volatility, and convergent strategies, which can develop positive correlations to equities during periods of rising volatility. The Fund utilises a quantitative systematic investment process which sets overall allocation based on how each portfolio sleeve interacts with the other sleeves.
"By obtaining the optimal balance between strategies that thrive in periods of turmoil and stability, we believe we have created a product that can potentially withstand all types of market conditions," says Partridge, who serves as portfolio manager of the fund, along with Roberto Croce, Salient’s director of quantitative research, and Bill Enszer, Salient’s director of investments.