Merrill Lynch Investment Managers is to launch a series of trackers designed to outperform their ben...
Merrill Lynch Investment Managers is to launch a series of trackers designed to outperform their benchmark indices by up to 1.5% each year after charges. The enhanced index funds are being targeted at UK and European pension schemes.
The funds combine the passive stock selection of index tracking with added techniques designed to take advantage of persistent market anomalies that arise in indices.
These anomalies can include the fact that stocks which are slated for entry into an index tend to outperform in the run-up to entry, while those expected to exit underperform.
Arbitrage opportunities aris ing from merger and acquisition activities is another example the funds could take advantage of, in a similar manner to the strategy used by hedge funds.
The global quantitative team running the funds also manages Merrill Lynch's alternative investment strategies.
Merrills' range will include index funds for the UK, continental Europe, North America and Asia Pacific.
The UK fund aims to outperform its index by 0.5% to 1% while maintaining a risk profile similar to conventional index trackers, according to Peter Gibbs, director of Merrill Lynch Investment Managers.
The other regional funds aim to outperform their relevant indices by 1% to 1.5%.
The lower figure for the UK fund, which will track the FTSE All-Share, is because the team believes there are better opportunities to outperform the indices in the other regions due to the greater presence of market anomalies.
The indices which will be followed are the FTSE developed Europe ex UK, FTSE developed North America and the FTSE developed Asia indices.
The team is based in London, the US and Tokyo.
Latest Financial Stability Report
After strategic review
As annual profits almost double
Industry Voice: One of the most serious problems with GDP is that it fails to measure the impact of economic growth on the planet's finite environmental resources. As economist Kenneth Boulding once put it: "Anyone who believes that exponential growth...