Tim Peach of Man Investments explains the use and application of UCITS funds within retail portfolios in Asia, in particular for accessing alternative investments.
Date: Nov 2010
Tags: Liquidity, Portfolio construction, Alternative investments, Diversification, Suitability,
According to Tim Peach in an interview, there has been a rapid increase in the last 12 months in the take-up of UCITS structures in Asia, especially in the alternative investment industry.
Despite a number of investors being disappointed with their experiences in the alternative space in 2008, Peach said they still recognise the importance of these assets within their portfolios, so want to get back in to the market – but only within a framework which guarantees them liquidity.
This is something which UCITS III delivers, he said.
Why UCITS funds fit the alternative space
Given that there is little commonality among hedge fund products and other alternatives, Peach the fact that UCITS funds bring a common framework for investment funds has helped get European regulators – and, increasingly, Asian regulators – comfortable, explained Peach.
For example, the Monetary Authority of Singapore recently approved Man’s flagship managed futures fund as a UCITS III structure, enabling it to be marketed for the first time to retail investors in Singapore.
This provides a critical new tool for portfolio managers and financial advisers who were previously unable to offer alternative investments to retail buyers, he said.
According to Peach, there are many alternative investment managers which believe that this asset class is not suited to the retail public. However, he said that Man thinks the better risk-adjusted return characteristics of alternatives suit the requirements of investors as a whole, particularly when delivered with high levels of liquidity.
Concerns about UCITS funds
At the same time, however, investors are typically cautious about investments they don’t understand, said Peach.
Most people feel they understand equities and companies generally, even though they probably don’t understand what is going on at the board or strategy level, he explained.
As a result, there tends to be a fear factor when it comes to managed products.
Peach said Man thinks that if it can bring the product to retail investors with a lower minimum investment, then people will slowly get comfortable with it and increase their exposure over a period of time.
Probably the biggest concern investors have in relation to the alternative investment industry post-financial crisis, however, is liquidity, added Peach, given that many of them were expecting monthly or quarterly liquidity, yet they couldn’t get their money back when they asked for it.
