Football, short funds offer Asian investors new volatility hedges

Thu Mar 10, 2016 12:29am EST
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By Nichola Saminather

SINGAPORE (Reuters) - Increasing volatility in traditional asset classes has given rise to a new range of hedge fund-type products in Asia marketed at individual investors, from short-selling funds to football-backed securities.

In particular, an unusually high correlation between stock and bond prices has driven investors to so-called liquid alternative funds, which employ hedge fund strategies but are more easily available to high net worth and retail investors.

Assets under management of liquid alternative funds in Asia jumped 25 percent to $47 billion in the first 11 months of 2015, according to analytics firm Cerulli Associates. That compared with a 5 percent increase in 2014 and an almost 10 percent decline in 2013.

"In the current market, traditional asset allocation has become a zero-sum game," said Madeline Ho, Asia-Pacific head of wholesale fund distribution at Natixis, which offers liquid alternative funds in both Hong Kong and Singapore, and plans to add more this year.

The 60-day rolling correlation between the FTSE World index .FTWORLDSU and benchmark 10-year Treasury bond, for example, has been climbing since late December, and has reached its highest level since August, according to risk-management firm Axioma.

New hedging products, such as Franklin Templeton's K2 Alternative Strategies fund and Natixis's H2O Allegro fund, employ strategies such as shorting, or selling borrowed securities with a view to buying them back when prices fall; relative value, or seeking to profit from price differences between securities; and global macro, or taking positions based on economic and political expectations.

Other products, such as Singapore-based Swiss Asia's Football Finance Note, which listed in Frankfurt in January, invest in non-traditional asset classes. Investors in the note purchase future revenues from the television broadcasting rights of English Premier League games at a discount.


Men walk past an electronic board showing market indices outside a brokerage in Tokyo, Japan,  March 2, 2016.  REUTERS/Thomas Peter