Years in hedge
UNIGESTION: A PIONEER IN ALTERNATIVE INVESTMENTS
Unigestion is a long-established alternatives manager with USD 2.7bn under management in liquid alternative assets.
Our history in alternative investments stretches back to the mid-1980s as one of the first European investors in hedge funds. Since then, our capabilities have evolved significantly and today we design and manage a diversified product range across both pooled funds and customised, segregated mandates.
We believe that consistent outperformance is driven by intelligent risk management, supported and continually enhanced through rigorous scientific research. Common to all our liquid alternative strategies is a disciplined, risk-managed investment process that allocates dynamically to alternative risk premia using a systematic investment approach.
Our focused range of strategies is designed to deliver cost-efficient and transparent return streams with a low correlation to traditional assets, adding enhanced diversification to our clients’ portfolios.
Building on a long heritage in alternatives
Unigestion began investing in hedge funds on its own account in 1986 and has been managing client money via funds of hedge funds since the mid-1990s. A decade later, we moved our expertise in-house and began managing pioneering systematic equity strategies that remain the foundation of our alternative investment capability.
Over the past five years, we have transformed our offering by developing liquid, dynamically allocated alternative strategies across asset classes that build our considerable expertise in systematic equity. That shift was driven by our enduring belief that allocations to Alternative Risk Premia (ARP) can deliver the cost-effective and diversified returns that investors need to navigate the next market cycle. Today, ARP strategies form the foundation of our alternative capability.
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Navigating the next market cycle
Alternative risk premia (ARP) strategies can address two key challenges that clients face today as markets transition to a new cycle:
- The need to improve the risk-return profile of balanced portfolios in the face of lower expected returns from traditional asset classes
- The need to broaden their investable universe of return sources as traditional assets become increasingly correlated
Traditional equity and bond markets are becoming more complex and volatile, and after years of strong performance, future returns are likely to be significantly lower and more correlated. Investors will need to embrace alternative, dynamically managed investment approaches to find the liquid, diversifying returns that they need to meet their investment objectives.
Real, often illiquid assets such, as real estate and infrastructure, can deliver attractive income streams with a low correlation to traditional assets, but long lock-up periods could present problems as interest rates rise. Hedge funds have also worked well as diversifiers but high fee structures have muted net returns in recent years.
On the other hand, ARP strategies offer:
- Effective diversification
Building Alternative Risk Premia Strategies
Alternative Risk Premia (ARP) strategies use systematic investment approaches and techniques often used by hedge funds, such as long/short and leveraged portfolio construction, applied both within and across asset classes. As a result, their return streams can vary significantly from those of traditional investment strategies.
- Cross-asset ARP strategies
A diversified allocation to multiple ARP harvested across asset classes can improve the risk-return profile of a balanced portfolio. Different ARP perform better in different economic environments. An allocation across a broad and diversified range of ARP can therefore offer improved diversification as well as return-enhancing benefits, particularly in periods of volatility in traditional markets.
Our cross-asset ARP strategy exists as a standalone solution, but it is also included within our flagship multi asset strategy, as 25% of the allocation. This reflects our firmly held conviction that ARP provide enhanced diversification and downside protection in stressed market conditions
- Single asset / single factor strategies
Investors also have the option of leveraging the diversification benefits of equity ARP or a single ARP. Some of these strategies offer access to part of the return stream provided by single-strategy hedge funds – but generally with better liquidity and greater cost efficiencies than all but the best performing hedge fund managers. Examples include equity factor, alternative income or volatility strategies that use long/short exposures to specific risk premia to achieve similar exposures to hedge fund counterparts.
Alternatives 2.0: A modular approach
There is little doubt that an allocation to hedge funds can provide a valuable source of returns that are uncorrelated to risk factors (alpha). However, a combination of technological advancement and decades of academic research has revealed that hedge fund returns are attributable to a diverse set of Alternative Risk Premia (ARP) as well as alpha.
We believe that harvesting risk premia and alpha generation are best achieved separately to reflect very different liquidity terms and pricing structures.
- Harvesting risk premia
Advances in quantitative modelling allow investors to access ARP via liquid, investment strategies that use a systematic, rules-based approach. Investors can therefore gain exposure to the same broad, diversified set of risks embedded in many hedge fund strategies but with greater flexibility and transparency, and at a lower cost.
- Alpha generation
We strongly believe that the best-performing hedge fund managers can deliver genuine alpha.
- A modular approach
Our research shows that it is possible to build a robust holistic alternatives solution around a core exposure to ARP, which can be complemented with a number of carefully selected, diversifying hedge fund managers able to generate alpha. This modular approach allows us to work with our clients to co-create solutions tailored to their specific requirements.
Why Unigestion for liquid alternatives
Sophisticated products that maximise portfolio efficiency will be required to navigate increasingly complex, market conditions in the new market cycle. At Unigestion, our unwavering focus on risk, long-standing expertise in both systematic and discretionary investment approaches and commitment to client-centric innovation mean that we are uniquely placed to deliver customised, liquid alternative strategies.
- Downside protection
Our strategies are designed to deliver long-term outperformance while minimising losses during market downturns. We apply a risk-managed approach as a way of generating performance across all our alternative strategies. In our view, risk-based investing is the most robust way to implement a liquid alternative strategy and underpins our proven ability to deliver smoother long-term returns for our clients.
Unlike other ARP providers that license investment tools from third parties, we design and manage our entire investment process in-house. We leverage our experience in managing systematic and hedge fund replicating strategies in-house to minimise downside risks and proprietary systems give us a more precise understanding of all risk exposures.
- Driving innovation through research
Our tradition of research sets us apart. Unigestion’s ongoing research focus, as well as our collaboration with the world of academia, enables us to arrive at new ideas to the benefit of our clients. Our portfolio managers are required to contribute to this research process, either to define systematic strategies or refine portfolio construction processes.
- Partnering and customisation
Our clients are our partners. With 89% of liquid alternative investments managed through segregated mandates, we have a proven ability to understand clients’ objectives and design strategies tailored to their needs.
Alternative Risk Premia –An innovative, actively managed strategy that aims to deliver cash +7% p.a. gross of fees, over a 3 to 5-year investment horizon, with a low correlation to traditional assets. It invests in a diversified portfolio of alternative risk premia, including macro directional, alternative income and equity factors.
Volatility Risk Premia – A volatility strategy that aims to deliver cash + 4% p.a. gross of fees, over rolling 3-year periods, with a maximum shortfall of 10%. It allocates across three different styles: Carry, Hedge and Relative Value, focusing on diversification and downside protection.
Equity Long/Short – A global long/short multi-factor equity strategy that aims to outperform the MSCI World index by 2% p.a. net of fees, over rolling 3-year periods, with a tracking error target of 2% to 6%. It allocates dynamically across Value, Momentum, Quality, Size and Low Risk factors.
There is no guarantee that investment objectives will be achieved
Our innovative multi asset strategies aim to deliver smoother returns in all market conditions using a unique, macro risk-based investment approach.
We have been helping investors to tap the potential of private equity for 25 years, thanks to our deep knowledge of local markets.
We offer a range of active equity strategies which seek to deliver long-term outperformance with reduced downside risk over a full market cycle.