Group is adding to its Vision range with the launch of a UK product
Allianz Dresdner plans to offer an onshore vehicle investing in a Luxembourg-based UK balanced managed fund, to be launched in the third quarter.
The UK Vision fund, which will feature a 25% global weighting, follows the January launches of Global Vision, investing in global equities and global bonds, and Euro Vision, investing in international equities and European bonds.
UK Vision will initially invest 65% in equities and 35% in bonds via allocation to the assets within Dresdner's range of more than 300 investment funds.
Curt Custard, head of multi-asset products at Allianz Dresdner, will manage the fund. He said the product will de-emphasise the traditional massive swings in asset allocation normally seen in managed funds.
'Instead of having a global long-only manager, we use multiple product managers,' he added. 'We will have a US specialty manager, a European specialist, a US small-cap specialist and so on.
'Each of them will have a specialist product that we will put against an MSCI World benchmark. To offset any excess risk relative to the benchmark, we will use futures or swaps.'
Exposure to futures and swaps will be limited to around 10%-25% of the fund's assets, he noted. UK Vision will focus on tracking error and volatility instead of adjusting portfolio percentages, according to Custard.
'Balanced products usually have a few long-only funds and carry out substantial asset allocation between them,' he said. 'The problem is that the asset allocation can dwarf the expected alpha from the active management of each of the underlying funds, so you end up with a huge mismatch in terms of your risk profile.
'We are looking at the information ratio and tracking error and optimising that risk instead of optimising asset allocation.'
The new fund is not managed like an ordinary fettered fund of funds as the vehicle will not invest so much in the fund itself as in the portfolio's underlying assets, Custard said.
'What makes us different from a multi-manager approach is that we have complete look-through into the underlying characteristics of all the funds at once, so we can review every single position on a daily basis,' he added.
Custard said the fund will have scope to invest in asset classes such as high-yield bonds, emerging market bonds, small-cap equities and possibly even commodities.
There will be two share classes, with institutional shares carrying a 0.6% annual management charge and the retail shares charging 1.25%. Intermediary commission will be 3%.
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