Lombard Odier targets liquid alternatives growth

Lombard Odier Investment Management is pushing more into the liquid alternatives market and is eyeing more product launches. 

The $50bn investment manager is expanding its line-up in the liquid alternatives market,  having recently lifted out a global macro team and brought a US long-short equity strategy to the UK. It is planning more launches too. 

“One area we’re seeing lots of growth in the market and are developing a reputation is on liquid alternatives,” says Dominick Peasley, head of third-party distribution at Lombard Odier Investment Management. 

“In the next 12 months we will definitely see more in liquid alternatives,” he says. “We see a lot of opportunity to stand out from the crowd.” 

“We have a long-term approach and are very thoughtful in how we bring new products to market,” he adds. 

Historically the manager has grown organically, but this year has seen it go through two team liftouts, of their catastrophe bond team and the recent global macro hires. 

The manager began its expansion into the liquid alternatives space with the launch of its US equity long-short fund a year ago, which had been run in the US for eight years. It launched the LO Funds Fundamental Equity Long-Short Ucits version with $250m (£163m) in existing client assets. 

The launch earlier this month of the global macro strategy is a further push into the space. The asset manager hired Vilas Gadkari and Giuseppe Sette from Brevan Howard and Jan Szilagyi from Fortress. 

Lombard Odier also runs the LO Funds–Alternative Risk Premia, a systematic fund. 

The key to success in the market is finding a “very well resourced team,” says Peasley. 

“Liquid alternatives are getting more and more traction and we are starting to see bifurcation between those managers who are good and those who are pretty average. 

“We have seen a number of managers who have come to the market who are not traditional hedge fund managers, and the strategies have worked for a little and then not worked,” he says. 

Managing liquidity is a key focus for the manager, and has been an ongoing problem for many liquid alternative managers who are implementing less liquid strategies but offering daily pricing and redemptions. 

For this reason the global macro fund offers weekly liquidity, rather than daily, says Peasley. While this move requires some explanation with investors, he says, “if you explain it to people they are very accepting, if you can justify the reason behind it”.