French emerging manager seeder NewAlpha Asset Management (NewAlpha) has signed a seeding capital agreement with German alternative firm Prime Capital AG.
Prime Capital, established in 2006 and focusing on institutional investors, offers absolute return, infrastructure as well as private debt funds.
It currently employs over 50 professionals, based in Frankfurt, London and Luxembourg and manages around €5.4bn in assets.
NewAlpha will invest in Prime Capital’s Gateway Target Beta Ucits fund, through a dedicated fund, structured and managed on behalf of large European institutional investors.
Post-investment, the fund will have close to €40m in assets under management.
The Gateway Target Beta Ucits fund is a systematic absolute return strategy with daily liquidity.
It seeks to provide returns similar to those of certain diversified hedge fund indices investing in or having exposure to global equity and credit markets.
Vincent Weber advises the Gateway Target Beta Ucits Fund and is head of Research at Prime Capital he joined in 2007 as portfolio manager.
He tells InvestmentEurope that the strategy offers a moderate risk profile with a volatility averaging 6% p.a. and seeks to outperform Eonia by 5%.
Also, while the strategy targets a long term positive correlation to equity markets, it has been designed to strongly de-correlate during market turmoil periods, Weber explains.
“The strategy has been slightly positive during the recent market turmoil posting a gain of about 2% for January 2016,” Prime Capital’s head of Research underlines.
The fund relies on two pillars with a long-only portfolio of equity and credit risks focusing on tail risk management and a diversified tactical long short portfolio, “exploiting momentum effects while also considering the yield of holding a particular asset, which is often referred to as carry.”
This seeding forms the first ever in Germany by NewAlpha.
Antoine Rolland (pictured), CEO of NewAlpha, stresses that “the field of entrepreneurial boutiques is not as large in Germany as in other areas in Europe and it has its proper eco-system.”
“A number of reasons have led us to seed Prime Capital’s absolute return strategy.
“For any asset manager that applies for a seeding, we analyse the investment management capabilities, the marketability of the product and the company itself. Regarding those criteria, Prime Capital is largely above the average of managers who requested some seeding from us,” Rolland tells InvestmentEurope.
“On the marketability side, Prime Capital’s strategy is an atypical tool as it provides daily liquidity and low fees while trying to replicate fund of funds,” he adds.
Rolland also highlights the important role of the Ucits format and the daily liquidity of the strategy in an environment that see institutional investors struggling to find yielding alternatives.
Philippe Paquet, managing director of NewAlpha, says the fund can raise interest from a number of institutional investors such as insurers looking for Ucits liquid products and low charges regarding Solvency II as well as asset managers managing private and institutional mandates.
“In Europe, investors are rather cautious towards the absolute return discretionary management. But gaps have been huge in the performances of absolute return funds, depending of their underlying strategy.
“In such a context, investors might have a close look to the performance of systematic strategies.” Paquet observes.
Weber sees the seeding of Prime Capital’s fund by NewAlpha as “an independent seal of approval regarding the quality of our investment process.”