BlackRock has launched a new absolute return fund for institutional investors in Europe to meet an expected increase in demand for regulated and liquid alternative investments.
The BlackRock Multi-Strategy Absolute Return Fund is the firm’s first UCITS-compliant multi-strategy alternative fund in Europe and adds to BlackRock’s existing range of liquid alternative UCITS funds. The fund arrives at a time when new European financial regulations such as AIFMD and Solvency II, coupled with historically high prices in equities and fixed income markets, are encouraging pension funds and insurers to seek ‘onshore’ alternative sources of investments returns.
Ingo Heinen, Head of BlackRock Alternative Investment Strategies in Europe, said, “There is a trend in Europe towards institutions seeking alternative investments via regulated ‘onshore’ vehicles. Many clients want diversified exposure to funds that add alpha and provide a different set of returns to equities and bonds, and this liquid multi-strategy fund will give them access to a range of alternative investment strategies in a cost-efficient and dynamic way.”
The fund
The fund utilises five underlying alpha-seeking strategies across equities, fixed income and global macro categories, and will be managed by BlackRock's Multi-Asset Strategies team. The underlying strategies will focus on relative value trading approaches and enable the fund to target positive returns in a range of market conditions with a lower risk profile than many traditional ‘long-only’ funds.
Institutions investing in the fund will benefit from daily dealing meaning they can invest and redeem capital on a daily basis, and clients will also be able to expect high levels of transparency into positions held by the fund.
“This is a true multi-strategy product, where the performance fees are charged on the aggregate performance of the multiple alpha sources - which makes this product very competitive. We think it is also a huge benefit giving investors a high level of transparency into the portfolio,” Heinen added.
Market challenges and investor appetite for hedge funds
Many pension funds and insurers are re-examining their allocations to traditional equities and fixed income assets, and looking to expand their use of alternative investments in 2014.
Low yielding fixed income markets, and equity markets near or at historical highs, are driving investors into alternative sources of returns. AIFMD and Solvency II regulations in Europe are also encouraging institutions to allocate more to alternative investments in regulated ‘onshore’ fund structures in a bid to maximize returns and minimise capital charges. A BlackRock survey in December 2013 of 87 of the world’s largest institutional investors representing over $6 trillion of investable assets found that 28 per cent of respondents said they intended to increase allocations to hedge funds in 2014 (source: BlackRock Institutional client survey).
Heinen said, “For many clients trying to manage funding levels and capital ratios, there is no alternative to ‘alternatives’ because they can’t rely on just fixed income or equities. With regulation often limiting the investment universe and choices available to investors, a UCITS solution can be helpful and we expect growth in investor demand to continue.”
BlackRock is one of the world’s largest hedge fund managers, managing $51 billion across single strategy funds, multi-strategy funds and custom hedge fund solutions. BlackRock is a preeminent provider of alternative investment solutions globally, with over $115 billion in assets as of March 2013.
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