In den Jahren nach Ausbruch der Finanzkrise mit der sich anschließenden Staatsschuldenkrise schwankten Anleger zwischen Pessimismus über die Lage der Weltwirtschaft und Optimismus hinsichtlich der Maßnahmen der Zentralbanken. Die Folge war eine hohe Korrelation zwischen den einzelnen Assetklassen. Seit einiger Zeit ist nun ein Rückgang dieser Korrelationen zu verzeichnen. Luke Newman von Henderson Global Investors erläutert, was dies für ihn und seinen Absolute Return Fund in der Praxis bedeutet.
Hedgework: What do you think, why have Absolut Return Funds (ARF) currently such a big inflows?
Luke Newman: Absolute return funds are considered by some to offer an alternative to traditional equity and bond funds, and in this light they currently look appealing. Where risk-averse investors might traditionally seek sanctuary in bonds, the effect of quantitative easing has driven down government bond yields to the extent that shorter-dated bonds offer little or no compensation for inflation. At the same time, the strong rally in equities has led to expectations of a correction.
Hedgework: There is a huge number of ARF which come to the market anew. Is Absolut Return always equally to Absolut Return? How do you define it?
Newman: There are certainly a variety of strategies loosely grouped together as ‘absolute return’. For us, it is a fund strategy which aims to make money in rising or falling markets, delivering steady returns instead of chasing market surges and following declines. This is made possible by combining long and short positions in carefully selected stocks, which takes skill and experience. This makes absolute return funds different from traditional, ‘relative’ return funds which compare their performance with a benchmark index. The fund is likely to deliver lower returns than long-only funds during periods of strongly rising markets but aims to deliver these returns with a lower level of volatility than the market.
Our holdings are the result of bottom-up stock picking. Our conviction, risk metrics and liquidity are used to determine position sizes as well as the gross and net exposure. The fund has a large and mid-cap focus and is a blend of core and tactical positions.
Hedgework: Not all ARF delivered in the past what was promised. What are the reasons in your opinion and what should investors pay attention to
Newman: It would be difficult for me to speculate on the performance of other Absolute Return strategies but I would point to the following factors which have helped our performance:
We offer protection against drawdown and flexible portfolio parameters. Net and gross exposure of the fund is driven by the managers’ bottom-up assessments. Being able to go long or short, based on an individual company’s prospects, allows the potential to generate absolute returns or support capital preservation in adverse market conditions.
Our investment process is simple. We invest in highly liquid instruments, without using complex option or derivative trading overlays.
Our robust risk managment. That means the fund maintains a rigid risk control policy, with a focus on capital preservation.
I and my co-manager, Ben Wallace, have 31 years of investment experience between us and we are supported by a 21-strong Pan European equities team. In-house research is a major source of added value for the fund.
Hedgework: Ist the inquiry for ARF only a hype or do ARF also become in the long term a firm component of the investor‘s portfolios?
Newman: An absolute return fund should enhance the overall risk-return characteristics of a balanced portfolio with returns which are lowly correlated to equity markets, and with lower volatility. They can be a source of steady, positive returns through different phases of the market cycle and should not only be considered as a temporary bolthole when markets are in retreat. It makes a compelling case for absolute return funds to be included as a ‘core’ fund within investor portfolios.
Hedgework: What do investors currently expect from managers?
Newman: Positive risk-adjusted returns, independent of market conditions and proven downside protection – the strategy returned 29.4% in the challenging conditions of 2008.
Hedgework: Your fund is top rated in many magazines and other comparisons. What makes the difference in comparison with other funds?
Newman: The appeal of absolute return funds is often more about protection against drawdowns – the peak-to-trough decline in performance during a specific period – in falling markets, rather than trying to outperform strongly rising markets. The fund has demonstrated strong downside protection, in even very challenging conditions, helping to provide the element of stability that absolute return investors frequestly seek. It is also devoid of complexity: we invest in highly liquid instruments, without using complex option or derivative trading overlays.
Hedgework: What is your investment strategy?
Newman: We target positive absolute returns through both ‘long’ positions (buying securities with the expectation of a rise in value) and ‘short’ positions – borrowing then selling overvalued assets, with the intention of buying them back for less when the price falls. This means that investors in absolute return funds such as ours should expect some protection when market conditions deteriorate, and the flexibility available should mean that a fund is not highly correlated with market moves. While absolute returns cannot be guaranteed, we have the tools at our disposal for both good times and bad.
Hedgework: How do you generate returns?
Newman: This is achieved through blending two types of trading strategies in the fund; ‘core’ positions and ‘tactical’ trades. The ‘core’ book is long or short positions in shares of companies based on their valuations and trends impacting a company. Positions are typically held for the long term. This can either be on our expectation of a company performing better or worse than the market anticipates. These positions typically represent one third of the fund.
The ‘tactical’ book consists of shorter-term trades which, again, can be either ‘long’ or ‘short’, and typically represent two thirds of the portfolio. This book allows us to be nimble, responding quickly to changing market conditions. For example, if UK interest rates rise faster than expected, there should be a number of tactical opportunities to identify companies that are likely to struggle with increased borrowing costs, and make for potentially attractive short positions.
Hedgework: What ist your current fund positioning? Are you mainly long or short?
Newman: As at 31 August 2014 the fund held 88 long and 39 short positions. Our net/gross market exposure was 31.6/76.1% respectively.
Hedgework: What is the biggest source of risk for your fund?
Newman: The most challenging environment for long/short managers is when there is a high degree of correlation between stocks, sectors and different markets. For example, in 2011, markets see-sawed almost in unison from one day to the next, based on risk-on and risk-off shifts in sentiment. Rather than being based on fundamental investment analysis into the underlying health and prospects of individual companies, market moves were driven by reaction to the policies of central banks and debt funding issues, particularly in the eurozone. The resulting environment left fewer opportunities to identify profitable trades for absolute return managers who, on the whole, experienced one of their worst years. These conditions provided a rigorous test of our process; however, we were able to largely protect investors’ capital while the FTSE All-Share fell.
More recently, some normality has returned to markets, with greater dispersion between share prices as investors react to company fundamentals and company-specific events. This has enabled the strategy to deliver strong absolute returns, with significantly lower levels of volatility than the market.
Hedgework: What is your approach to manage risks?
Newman: Our focus is on capital preservation: A margin of safety is built into the price paid for each stock and the fund managers review or close any position that loses 10% of its value. Risk is continually monitored both by the fund managers and by the independent risk management division at Henderson.
Hedgework: How do you manage volatility risk?
Newman: While stock market volatility is not welcomed by investors generally, it gives long/short managers like us, who seek opportunities based on detailed stock analysis, the opportunitity to take full advantage. We are able to find more short positions that offset long positions, reducing the portfolio’s overall market exposure and helping to preserve client capital in falling markets. Equally, when fear looks overdone they can increase their bias to long positions and subsequently benefit form any market rises. This approach has enabled us to achieve annualised net returns of 10.9%, with a volatility of 6.0% since the inception of the strategy as at 31 August 2014. We have managed this fund through a wide array of different conditions – up markets, down markets, high volatility markets, low volatility markets. A period of higher volatility within range bound equity markets is something that doesn’t affect our outlook and could actually suit us because we aim to deliver our return targets regardless of what markets do.
Hedgework: On which sectors is your main awareness?
Newman: We trade within all sectors of the UK market. In terms of current sector positioning, we retain our long exposure to insurance and banking stocks, which we expect to benefit from any further steepening of the yield curve. We also increased our long exposure to areas such as residential housing and gaming, which appear to be benefiting from a pick-up in economic activity.
We do a lot of work on both the long and short sides of the portfolio; both are equally important to the overall strategy and performance of the fund. Stock selection reflects our conviction, overlaying core positions with tactical trades. But there are themes that emerge within this. Top-line growth, secure cash flows and strong balance sheets are typical characteristics of the companies that we feel offer the most attractive valuations for the long book.
Stocks are shorted where we expect specific short-term external or internal factors to weigh on share price performance both in absolute terms and relative to the market. Short positions in the portfolio reflect stock-specific views rather than an overall sector strategy. So we look for both long and short opportunities in each sector.
Hedgework: What have been the key themes in 2014?
Newman: In terms of current positioning, we are taking advantage of the flattening in yield curves to begin building up positions in companies that will benefit from the first rate rises – banks and insurers are two such potential beneficiaries. On the short side, the focus is on companies with exposure to emerging markets where rate increases may impact the growth outlooks of consumer staples companies. Also, those companies which have failed to address their pre-crisis balance sheets – typically later cycle, consumer-exposed in the leisure, travel and retail space. In terms of the UK specifically – those areas which are vulnerable to political interferrence as the UK election draws near – bookmakers and gambling generally and utilities and transportation.
Hedgework: At last, could you please share with us your near term and medium term outlook of the global markets?
Newman: After a quiet first half of the year, for both equity markets and the fund, our confidence levels are increasing for the second half of the year. Fund risk levels were reduced significantly – both: gross and net – early in the year in anticipation of currency driven downgrades for London listed equities, due to an exceptionally strong Sterling, uncertainties around the timing of any interest rate cycle and mounting macro issues – various military conflict flashpoints or Emerging Market growth slowing. The sharp share price falls in a variety of UK-focused businesses and some more midcap businesses, driven by proximity of interest rate rises and poor liquidity, have created some interesting investment opportunities on the long side. We have identified some good opportunities on both the long and short book and are currently using some of the summer volatility to build up both sides of the portfolio.
Das Interview führte Alexander Heintze.
kam 2011 als Investment Manager für europäische Aktien zu Henderson. Zuvor hatte er seit Juni 2009 für Gartmore gearbeitet und dort den Gartmore UK Absolute Return Fund verwaltet. In seiner Zeit bei Foreign & Colonial legte er den F&C Special Situations Fund und später den F&C Enhanced Alpha Fund auf. Dabei machte er sich die Vorteile der OGAW III-Richtlinie zunutze, um eine aktive Shorting-Strategie einzuführen. Luke Newman wird von Citywire mit AA bewertet.
ist eine internationale Vermögensverwaltungsgesellschaft, deren Geschichte bis ins Jahr 1934 zurückreicht. Das hundertprozentige Tochterunternehmen der Henderson Group plc. verwaltet ein Anlagevermögen in Höhe von 93,3 Mrd. Euro (Stand: 30. Juni 2014) für Kunden in Großbritannien, Europa, im asiatisch-pazifischen Raum sowie in Nordamerika und beschäftigt weltweit etwa 850 Mitarbeiter.
Als reiner Vermögensverwalter bietet Henderson eine Produktpalette, die von Aktien und Anleihen über Multi-Asset-Angebote bis hin zu alternativen Produkten wie Beteiligungskapital (Private Equity) und Hedgefonds reicht.