Skandia Investment Group (SIG) has restructured its Alternative Investments fund of funds in response to market volatility.
In a move away from the established format of equal weightings between asset classes, the £27m fund increased its exposure to currency, equity market neutral, and volatility assets. It has reduced exposure to commodities, gold and timber.
At its launch in June the fund had 10% in each of 10 alternative asset classes including hedge funds, infrastructure and water. As turmoil in the markets continued, these assets began behaving in different ways, leading the group to rebalance the portfolio.
The largest weighting in the fund is 14.2% in JPM Highbridge Statistical Market Neutral fund followed by a currency play through Morgan Stanley FX Alpha Plus at 13.1%.
It has 12% in Commerzbank UK Premia and 11.2% in two infrastructure offerings from TG RARE and Macquarie.
Slightly above the previous 10% weighting are KBC ECO Water fund at 10.4% and Fulcrum Alternative Beta Plus, a hedge fund, at 10.2%.
Ryan Hughes, the fund manager, has drastically reduced the position in BlackRock’s Gold & General fund, which makes up 3.9% of the portfolio. He also reduced exposure to commodities, global macro and timber, where products from Aviva Morley, Mellon and Morgan Stanley each count for 7% to 8% of the fund.
Hughes (pictured) says: “We made these changes as a result of looking at the risk of volatility in the underlying assets. The volatility of the gold price, for example, has changed completely over the last six months. There have been sharp falls followed by big rallies and sideways moves. Gold has been behaving like equity markets.”
“The equity market neutral asset class is the same as gold but in reverse, showing low levels of volatility.” Hughes favours the JPM Highbridge fund in this sector because of its strong track record and quantitative approach, he says.
Since its launch Hughes has sold a commodity fund from Lehman Brothers and replaced it with a Morgan Stanley product following Lehman’s collapse. The only other significant change was the addition of the Macquarie infrastructure vehicle, he says.