S&P warns of UCITS III uncertainty

While the fixed income sector is traditionally viewed by investors as one of the most predictable and undifferentiated, S&P said that many fund managers have been taking advantage of new freedoms provided by UCITS III and mimicking some of the techniques employed by institutional fixed income funds. Over the past six months, S&P said it had seen an increased use of derivatives, the introduction of increasingly differentiated sources of alpha (risk-adjusted) returns and small uncorrelated off-benchmark bets. It said that a fund’s emphasis on risk-adjusted returns relative to an index, rat...