Man Group is determined that its new long/short European fund of funds should be able to invest outside the Ucits arena despite traditional concerns over transparency and liquidity.
The portfolio comprises between seven and 14 managers picked using the recommendations of a team of analysts based across the region. Lowe says the group has prioritised bringing in people with experience of trading the underlying assets so that their focus is as much on analysing what the managers invest in as on the managers themselves.
Within this process the managers are divided into style categories, including thematic, proactive traders, and balanced so that the composition of the fund can be adjusted at various points in the cycle to reflect periods where different strategies are likely to outperform.
“If you were in a market with a lot of aggressive M&A activity, you would expect to see us move towards someone with a strong thematic bias to private equity,” says Lowe. “Our 100% transparency allows us to see any excess risk, style drift or alpha destruction by our managers. Since May we’ve moved three managers out and brought two new ones in, with a portfolio turnover of about 40%.”
As an example of a holding, Lowe points to Zebedee Capital which, he says, has some of the best macro analysts in the industry. They have a record of gauging where market sentiment is heading and restrict themselves to sectors that are prone to large market shifts based on that information.
Although eastern Europe is not represented in the portfolio, the growth opportunities in the region appear to have proved tempting. “In the past this area has been a large-cap, ’me too’-type play where the long/short guys tend to have either a strong long bias or are market neutral and suffer from poor liquidity,” Lowe says.
“We think we have identified a new manager who can add value on both the long and short books, so we’re going through the final stages of approval.”