The need to find new sources of profitability with low interest rates and to de-correlate with highly volatile market environments such as the current one is causing managers to once again trust free investment funds (FIL), the Spanish hedge funds, after years in oblivion. Proof of this is that Banca March has launched its first FIL, which will be able to invest in alternative assets.
Its manager, March Asset Management, has registered the fund March Optimum Selection, a global FIL that will be managed with a 12% annual maximum volatility, according to your brochure.
The fund will invest between 25% and 100% of its total exposure in variable income and between 0% and 75% in fixed income. In the fixed income part, there may be securitizations, subordinated debt and preferred shares. Its prospectus warns that investment in low credit quality fixed income – assets without a rating or 'high yield' could account for up to 75% of the debt – and in small capitalization equities “can negatively influence the liquidity of the fund” .
You can also have venture capital funds (but not directly investing in unlisted securities), alternative management funds and commodity ETFs. In addition, it has the possibility of leveraging through derivative products without exceeding 200% of the fund's assets and respecting the maximum annual volatility, and may borrow up to 25% of the assets and "only if it is strictly necessary".
THE MADOFF SCANDAL IS LEFT
The FIL, which started operating in Spain in 2008, had a slow takeoff due to the Madoff scandal, which caught many hedge funds. But in recent years, its heritage has accelerated, to the environment of the 2,300 million euros, according to Inverco. In 2019, its volume under management increased by more than 15%.
Without going any further, this February Santander Asset Management launched its first FIL since Madoff's catch, with the possibility that it even has a sustainable approach “whenever possible”. Other large bank, insurance or independent managers that have FIL are Sabadell Asset Management, Mutuactivos, Bestinver, Cobas, Azvalor, Arcano or Alantra.
To guarantee liquidity, an aspect that is of great concern in the coronavirus crisis, March AM has established three mechanisms in the FIL: a notice system for reimbursements exceeding 300,000 euros, resorting to indebtedness if necessary and maintaining around 5% of the liquidity portfolio under normal circumstances, up to 20% in extraordinary situations.
Aimed at retail and professional clients, it is available from 100,000 euros with a management fee of 0.55%. Part or all of the investment may be made through funds from third parties.
Banca March has accelerated its commitment to non-traditional assets in the last year. In September, partnered with Franklin Templeton's K2 Advisors for advice on portfolio creation of alternative management funds, and in December reached an agreement with SYZ Asset Management to launch an alternative fund.
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