In practice the fund’s gross exposure has ranged between 120% and 150%, and the predecessor offshore fund sometimes went as low as 60%.
The former Cayman fund was rolled into the UCITS at the request of a cornerstone investor, because UCITS is tax advantageous for many European investors, and also to appeal to a wider investor audience. While 85% of the fund’s €60 million in assets are institutional, it is investable by retail investors in the major European markets.
As befits the world’s biggest insurer, the investment remit is broad. Geographically the universe extends beyond the Eurozone and the European Union to allow potential for trading stocks in Russia or Turkey, although currency risk in these markets would be hedged.
In terms of market capitalisations, manager Harald Sporleder can search for value in the micro-cap category, investing in firms with market capitalisations of €50-100 million as part of a long-term thematic investment. Liquidity controls are not set in isolation for the fund, but rather are defined at the group level in the context of Allianz’s global holdings in a company. This overarching perspective on liquidity acknowledges that Allianz’s team of 35 industry analysts, split between Frankfurt and London, are feeding ideas into various pools of capital. However, Sporeleder retains right of veto and is not compelled to follow the recommendations of the analysts in his quest for alpha.
With maximum net exposure of 15% in either direction – and beta adjusted exposure realizing near zero – this is a pure alpha product, striving to average at least 6% alpha a year on both long and short books to make 8-10% after fees, at current levels of interest rates.
If rates continue to rise in Europe, returns could be enhanced by interest since the market neutral nature of the fund leaves nearly all of it earning interest from money market funds.
The trading book operates like a normal long/short equity fund, borrowing cash equities for shorting rather than using single stock swaps. The swap, executed by Morgan Stanley, enters the equation at the level of total returns from the trading book.
Key details
Fund name: Allianz RCM Discovery Europe Strategy
Management company: Allianz Global Investors
Promoter: Allianz Global Investors
Status: Open
Inception date: 20th October 2009
Strategy
Kind of fund: Hedge Fund
Strategy group: Long/Short
Region: Europe All
Asset classes: Equities
Particulars
Currency: EUR, GBP
Share class name: I EUR
ISIN: LU0384030010
Domicile: Luxembourg
Listing: Luxembourg Stock Exchange
Fund structure: SICAV
NAV calculation: Weekly
Liquidity: Weekly
Day (if not daily): Tuesday
Notice (banking days): 0
Minimum investment: 1,000,000
Minimum retail: 100,000
Min. investment currency EUR
Income Accumulative
Other income: Distributive
Fees
Entry fee 2%
Exit fee 0%
Management fee 1.75%
Performance fee 20%
High water mark Yes
Crystalisation Annual
Hurdle rate Yes
Hurdle Eonia
Analysis
Year to Date 1.19%
Annualised return - 0.64%
Annualised volatility (monthly data) 5.40%
Sharpe ratio (2%) (monthly data) - 0.49
Correlation to S&P 500 (monthly data) 55.45%
Correlation to iBoxx (monthly data) - 39.36%
