Fund of Funds of the Year - Aurum Isus Fund
For more than 15 years Aurum Fund Management’s flagship Isis fund has produced consistent risk-adjusted returns, low correlation to traditional risk assets and low volatility.
In 2013 the fund provided an attractive alternative to investment grade fixed income, finishing the year up more than 9%, during which time the Barclays Global Aggregate Bond Index delivered its first year of negative returns since 2005.
The fund has delivered solid performance during bond sales. During the “taper tantrum” of May and June 2013 it returned 1.1%. And, when tapering was announced in December, the Barclays Global Aggregate Bond Index declined 0.6% whereas the fund was up 0.9%.
Aurum’s core team has been together – managing its own and its clients’ assets – for almost two decades. This has allowed a consistent investment philosophy, facilitating a focus on ensuring capital preservation while compounding returns.
Aurum’s approach to investment involves identifying managers that deliver true alpha and a diversified stream of returns. It believes in a “commonsense” approach to the investment process, with experience and judgment of the critical elements.
Aurum’s disciplined investment process uses proprietary software. Having a team of in-house programmers that have worked at the firm for many years enables it to develop specialist tools, and its universe screening and investment process leverage both proprietary systems and long-term investment experience.
Fund Launch of the Year: Global - Neuberger Berman
On September 25 2013 Neuberger Berman launched its Global Bond Absolute Return fund, addressing increasing demand for absolute return fixed income that mitigates the effect of rising interest rates.
The fund was launched with assets of $42m and is managed within the global fixed income team, which includes seven senior portfolio managers – two in London and five in the US. Performance in the year-to-date was 0.69% (USD I Acc) and 2.4% since inception.
Neuberger Berman uses sector specialists and analysts to select securities and has 80 to 100 people generating ideas on a daily basis that feed into the fund. The fund has an absolute return objective and aims to generate an annual return 4% above cash over a medium to long-term investment horizon.
The portfolio managers utilise a proprietary framework called State-Space Analysis that combines multiple sources of alpha. This fundamentals-driven approach is designed to avoid persistent macro or thematic biases in the portfolio, and targets a low beta to fixed income markets over a full market cycle.
This process is currently deployed in the management of both benchmarked and unconstrained strategies in the US. In the model, a range of fundamental variables are taken into account, along with the probability of these scenarios materialising.
Neuberger Berman has a tested process for assessing relative value and has established sector specialists across all the different opportunity sets within fixed income. The company’s fixed income platform spreads across the globe, including offices in the Netherlands and Singapore in addition to its core UK and US presence.
Fund Launch of the Year: Asia - BNP Paribas Investment Partners
In March 2014 BNP Paribas Investment Partners launched a fund investing in Chinese RMB offshore bonds, its Flexi I RMB Short Duration Bond Fund.
The fund’s features have been developed to limit capacity constraints and serve a wide range of client needs. Offshore RMB bonds currently offer 150bp to 200bp yield pick-up relative to similarly rated bonds in other currencies – both for corporate and government – and the fund is expected to yield 4.5% in RMB terms gross of fees.
The fund was designed to address concerns relating to investing in bonds in a rising interest rate environment, so it was set up as a short duration fund.
Offshore RMB bonds have low duration and high yield-to-duration ratio – 1.5 – compared with major asset classes. Several competitors have a duration exposure that is higher – often between 3 and 4.8 years – or lower if they are positioned as a currency fund with a duration of less than three months.
The fund leverages a three-year track record from a previously-established fund, run since February 2011, that invests approximately 70% in RMB offshore fixed income.
The average credit rating of the fund has been set at investment grade – BBB – and RMB bonds from the same issuer have approximately half the volatility of their US dollar counterparts, leading to smoother returns and diversification in times of market stress.
Funds of the Year
Fund of Funds of the Year - Aurum Isus Fund
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