QAM targets European institutions with new Ucits quant fund

Mar 27, 2011

The Singapore firm’s global equities product is believed to be the first Ucits quant strategy launched by an Asian hedge fund.

Singapore-based hedge fund Quant Asset Management (QAM) believes that Ucits is the key to gaining access to a wider investment area for its computer model driven stock-picking strategy.

Quant Global Equities Fund Ucits, which launched this month at $24 million, is expected to grow rapidly in size, according to QAM director Frank Holle. It has a capacity of over $1 billion and is thought to be the first Ucits III-compliant quantitative hedge fund to come from an Asian firm.

The new product is based on the QAM Global Equities Fund, which has $125 million in assets under management (AUM) and has returned 19.25% on an annualised basis from its launch in April 2004 up to December 2010.

The launch of a Ucits version of the fund opens up the strategy to a bigger pool of investors – in particular, European institutions such as pensions and insurance firms. “Ucits is a stamp of quality,” says Holle. “We think it’s going to be a big boost to our firm in terms of attracting the right profile of investors.” After the Madoff scandal in 2008, European investors shied away from offshore funds, he notes.

“Within the Ucits platform, investors get more control, governance and transparency.” Another feature that QAM believes will help draw institutions is daily liquidity, which is facilitated by its Ucits platform provider, Luxembourg Financial Group.

QAM’s computer model selects between 100 and 200 undervalued stocks on a global basis for its long positions, hedged with short positions in index futures. The portfolio, which changes on a monthly basis, is overweight on stocks in Hong Kong, the US and Canada at the moment, with iron and steel, commodity chemicals, and auto parts ranking as the top three industries.

There are no plans to create a Ucits version of the QAM Asian Equities Fund, launched in 2004, says Holle. The firm is focused on growing the strategy to its capacity of $150 million.

QAM is seeing increased investor interest in all three of its funds, says Holle, who expects the interest to lead to new inflows. “People were a bit disappointed in the quant sector two to three years ago,” Holle acknowledges, while pointing out that the firm has not had a down year in any of its funds. “It’s a niche market, but the interest is definitely coming back.”