QCM outlines reasons for Ucits version of Alpha Financials Programme

Jonathan Boyd

What asset classes beyond equities, bonds and currencies might you seek to add to the mix?

The product and its underlying Alpha Financials Programme is well diversified and yet staying with financial markets only. The absence of direct commodity exposure is made up by exposure to equity indices and certain currencies where commodities dominate the economy. For example trading the Mexican Peso indirectly exposes the product to oil, South African rand to metals and gold. Australian dollar and Canadian dollar also give indirect exposure to commodities as does the Scandinavian currencies. Not only do we get exposure to commodities but we also have participation directly through equities in some of those economies. The product offers an all-encompassing absolute return investment vehicle that is liquid and good for most market conditions. The long/short mechanism together with asset class diversification by region eliminates the need to add any other asset class to the product.

How does this type of Ucits strategy sit alongside other traditional long only or alternative investment strategies, within an investor’s overall portfolio?

By opening up the short side of an investment, opportunities are doubled compared to just a long only portfolio. This makes a long/short strategy such as this a great diversifier bearing low correlation to the long only portfolio. Such macro/CTA strategies additionally show certain attractive properties to hedge risks faced in a long only approach particularly during systemic events. The 2008 global financial crisis is a good example of this. While the AFP was not traded then, but the underlying Model also used in the QCM’s flagship Global Diversified Programme returned +60% in 2008 in that product, offsetting most of the risk in a long only strategy. The programme has generated a cumulative compound return of 512% over its near-20 year history in spite of the challenges for hedge funds in recent years through low market volatility. This demonstrates the strategy’s attractive long term wealth building power and makes the new Ucits product a strong complement to any portfolio especially to one offering a traditional long only profile.