Kames Capital has added to its absolute return franchise with the launch of a new equity fund in a bid to satisfy demand for a cautious investment approach.
The Kames Global Equity Market Neutral Fund will target a positive absolute return over a rolling three year period, with lower volatility than government bonds.
The risk profile is consistent with investors seeking returns of one-month sterling Libor plus 4 percentage points net of 1 per cent annual management charge, according to the firm.
It added the fund will aim to deliver performance with positive returns regardless of market conditions, low levels of volatility and low correlation to underlying markets.
The investment product will be co-managed by Neil Goddin and Craig Bonthron, both of whom current run the £53m Kames Global Equity fund.
The duo will be supported by Malcolm McPartlin who is co-manager on other absolute return vehicles.
The fund will sit alongside the fund house’s six existing absolute return funds and will be available in the UK, Austria, Belgium, Germany, Guernsey, Ireland, Italy, Jersey, Luxembourg, Malta, Netherlands, Spain, Sweden and Switzerland.
Its base currency will be sterling, but there will also be euro, US dollar, Swedish krona and Swiss franc share classes.
Provider view
Stephen Adams, head of equities at Kames Capital, said: “We are acutely aware of investors’ fundamental focus on capital preservation, especially in current market conditions. The new fund enables us to continue to meet this demand from a global perspective, while remaining true to our philosophy of providing real market neutral returns.
“The new fund will blend quantitative and fundamental research in a well-defined investment process. It complements our existing absolute return franchise, providing investors with a wide choice of strategies.”
Adviser view
Malcolm Steel, a chartered financial planner with Edinburgh-based Mearns & Company, said: “As a business, I say that we probably take a more cautious approach to investments compared to our peers. Our clients seem to share our approach but whether that is a reflection of UK investors as a whole is difficult to say. I think the volatility that has been around, particularly in the past five or six years, has made people more anxious in terms of investments.
“I am quite suspicious of absolute return investment strategies because some of the instruments used, like derivatives, can easily blow up. I think these products are often marketed as safe propositions but they can indeed make a loss.”
He added: “For a fund adopting an absolute return strategy, the AMC is quite competitive. The high minimum investment figure suggests the fund is not a proposition for the mass market.”
Charges
The fund’s B-share class will have an annual management charge of 1 per cent and minimum initial investment is £500,000.
Verdict
Recent history has seen a shift in risk appetite to a more a cautious approach among investors amid a prolonged period of uncertainty and volatility which continues to affect stock markets across the globe. As Mr Steel mentioned, absolute return products can come across as a silver bullet solution to those looking for stable returns but the strategy does not deny the potential for capital loss. Intermediaries should ensure that this message is communicated to their clients. Here, with minimum investment set at £500,000, it seems that the proposition is targeted to high net-worth investors rather than mass affluent retail consumers.
