Lyxor mulls launch of Asian quant fund

Jul 14, 2011

The French fund manager is considering putting out an Asia absolute-return fund to address investor demand for locally focused products.

Lyxor Asset Management may consider the launch of a pure Asian quantitative fund targeted at institutional investors in the region, says Nicolas Gaussel, the firm's global head of quantitative asset management.

“In Asia, we’re seeing some demand for a pure Asian product,” said Gaussel during a trip to Hong Kong last week. “We are working on a product which ... would use the same investment techniques as our absolute-return products, where we try to diversify [the portfolio] as much as possible and follow the trends.”

Lyxor, the asset-management subsidiary of Société Générale, is in discussions with potential cornerstone investors – including institutions and funds of funds – and will only launch an Asian fund if it receives firm commitments, says Gaussel.

In May, the firm launched a Hong Kong share class for Epsilon, its managed-futures fund, which has about $325 million in AUM globally. Aimed at retail investors, Epsilon invests in listed futures contracts across seven asset classes: long-term rates, short-term rates, equity indexes, foreign exchange, metals, agriculture and energy.

Epsilon has received positive early feedback from the Hong Kong market, says Gaussel, who did not detail the amount of investment assets in the local share class, as the fund is still in its early marketing phase. The fund has posted an average annual return of 15% over the past six years.

Hong Kong and Singapore are among the Asian markets where the appetite for trend-following funds is at a developing, yet promising, stage, says Gaussel. South Korea has shown strong interest, while Japan is a more mature market with a long investment history in the asset class. About 30% of Epsilon's global inflows come from Japan, he notes.

Lyxor manages about €86 billion ($123 billion) of assets across more than 1,600 funds, with structured and quantitative funds comprising about 25% of its product offerings.

Demand for structured products in Hong Kong fell heavily after 2008. However, demand for such products has recently been on the rise in mainland China, says Gaussel, as investors are now seeking risk-controlled investments that are more diversified, with a low correlation to equities.