QCM outlines reasons for Ucits version of Alpha Financials Programme

Jonathan Boyd

Quality Capital Management recently announced that it was pursuing a Ucits version of its Alpha Financials Programme strategy. Aref Karim, CEO and CIO, has outlined the reasons for the move.

What is the reason for creating a UCITS version of an existing QCM Alpha Financials Programme (AFP)?

In the evolution of the investment management industry there has been an ever-increasing demand for greater liquidity, transparency and regulation. Ucits tackles these needs. Considerable demand for such products has been coming from European countries, specifically Switzerland and Germany. Historically, QCM’s client base has been largely institutional. As a means of diversifying the client base, we established the Ucits fund in order to broaden our investor categories to also include retail. The Alpha Financials Programme (AFP) with its financials-only exposure was structured into a Ucits product in order to offer a cost effective solution for the underlying investor, eliminating the requirement for a more costly certificate or swap structure. The product has been designed to have an indirect exposure to commodities by trading equity indices and currencies of certain economies that are commodity sensitive. This makes the AFP an all-encompassing diversified product with no direct involvement in commodities.

Are you looking to target any particular client base with the new vehicle?

AFP Ucits is an institutional quality product targeting institutions, such as pension funds, looking for a more transparent and regulated vehicle. The structure has also been put in place to access the retail market. By setting lower minimums we have made accessibility to such retail monies easier. We are additionally looking to offer the product via well-established UK IFA’s to source retail funds. QCM believes the product is suited for all investor-types. It is a long/short diversified investment that gives exposure to all major global equities, fixed income and currencies with an indirect exposure to commodities. The product carries attractive fee terms of 0% management fee for any investment made within the first 6 months of the launch and the arrangement lasts for the lifetime of the investment. It charges 20% incentive fee on net new high gains.

What are the key demand drivers you have experienced from your clients in terms of the search for a Ucits vehicle that can offer multi-asset exposure across developed markets?

The product offers an all-encompassing long/short investment solution that is not only globally diversified geographically but also across major asset classes. It is actively managed to source its primary returns in a differentiated way: by moving capital around the portfolio through a robust dynamic asset allocation engine. The product systematically aligns with macro-economic fundamentals and is lowly correlated to passive investing in stocks and bonds. It potently sources returns from the short side when markets decline. The QCM Model driving the strategy encompasses the attributes of momentum, value, portfolio correlations and market convexity in one package. Trading via futures it is highly liquid with low transaction costs and brokerage commissions. The product offers wide-scale global diversification through all core financial markets.

Financial futures may offer liquidity, but are there any other risks particular to this asset class that investors need to be aware of, eg, tightening regulatory framework?

Financial futures are highly liquid trading with large volume and open interest even in normal times. The Ucits product trades all markets in the largest globally recognised futures exchanges. Futures markets offer transparency, low commission costs, one price for all at any one point in time, marking to market with no subjective valuation risks and one daily settlement price. The regulatory framework in futures is effective and efficient. Risks of default in exchanges are negligible as often times they are controlled by government agencies. We do not see any other risk in financial futures that is different from other instruments. QCM diversifies globally the exchanges it trades in from Australia, Singapore, Japan, UK, continental Europe, and North America.