Alternative UCITS inflows stayed strong in 2016

Alternative UCITS inflows stayed strong in 2016

Investors continued to put money into alternative UCITS funds last year although inflows couldn't match levels seen in 2015.

Statistics from Lyxor AM, part of SocGen, show €31bn ($33bn) worth of new assets flowed into the products last year.

That was down from the record €70bn inflows seen in 2015.

Even so, the performance looks positive when compared to €63bn outflows from long-only equity mutual funds in 2016.

“The figures indicate that investors were looking for diversification in a time dominated by uncertainty and political surprises,” Philippe Ferreira, senior strategist at Lyxor, wrote in a note to clients.

Alternative UCITS funds offer hedge fund style, absolute return strategies within the UCITS regulatory framework.

Often asset classes are less correlated to traditional markets and carry higher returns than fixed-income funds challenged by negative interest rates.

Credit Suisse launched an alternative UCITS fund last week focusing on trend-following, a strategy commonly used by hedge funds using rule-sets that react to trends in the price and volatility of stocks, bonds and currencies.

“Much the fastest-growing section of the hedge fund industry, the alternative UCITS phenomenon shows no signs of abating,”  Daniele Spada, head of managed account platform, Lyxor Asset Management wrote last year.

“Investors need strategies to diversify their portfolios, and this has led them to look to hedge funds. But they want hedge funds in a regulated, transparent format, which is what UCITS strategies are able to provide.

“What’s more, UCITS is tried and tested: the regulation has been in place for several decades; so it is in an advanced state and is trusted by investors.

“In the space of a few years, UCITS has become a powerful brand, exerting the appeal of transparency and simplicity of use on investors.”

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