DUBAI: In a global investment environment where government bond spreads are at historical lows, equity markets facing high volatility and longer term inflation risk is on the rise, alternative investments will play a crucial role in investors’ portfolios, according to Neuberger Berman, a leading global asset management company.
The firm, a predominantly US centric asset manager with $250 billion of assets under management is currently on a global expansion spree and expects the Middle East and Asia Pacific regions to be important target markets.
It has on ground presence in Dubai for about two years. “We believe that there is more than $200 billion [Dh735 billion] money invested in hedge funds from the Middle East. Regional investors have very high expectations and our objective is to deliver products and services that meet these,” said Khalid M. Murgian, Managing Director and Head of Mena of Neuberger Berman.
The biggest concern of Middle Eastern investors, according Murgian has been the lack of liquidity in hedge fund investments, which was aggravated by scandals that happened through the financial crisis such as Madoff, Galleon etc. In addition, the perception of excessive management fees and lack of transparency made investors to look at hedge fund with suspicion.
Although hedge funds have historically outperformed other asset classes both on absolute and risk-adjusted basis, the huge credibility crisis faced by the industry following these scandals have resulted in a fundamental change taking shape in the industry.
While investments in hedge funds have historically been made through offshore fund structures, the last few years have seen the rise of onshore vehicles such as undertakings for collective investment in transferable securities (UCITS) structures in an effort to better address investors’ concerns of liquidity, transparency and competitive fee structure.
The trend is fast gaining currency. Along with Neuberger Berman some of the largest hedge fund managers such as BlueBay Asset Management, Marshall Wace and Brevan Howard are piling into the liquid alternative fund space as demand is on the rise.
A recent survey by Deutsche Bank AG of 86 hedge fund managers found that 42 per cent currently offer liquid alternative products; up from 27 per cent last year. On the demand side, the study showed that alternative UCITS assets have grown over 40 per cent annually, while the hedge fund industry has grown 13 per cent.
In the liquid alterative space Neuberger Berman has Absolute Return Multi — Strategy Fund (ARMS) for global investors in the lines of its US regulated version of the same strategy.
This product has virtually ironed out the structural drawbacks of hedge fund investing through a client — friendly UCITS vehicle. The structure offers investors key features such as daily dealing, no performance fees at any level, a capped total expense ratio, high levels of transparency and control of assets through the exclusive use of managed accounts.
“The idea behind liquid alternative is to bring hedge fund strategies to investors while tackling some of the historic drawback relating to fees, liquidity and transparency,” said Fred Ingham, Managing Director and Head of International Hedger Fund Investments.
Under the UCITS structure, Neuberger Berman offers, liquid alternative asset classes in equity, debt, emerging market debt, Emerging Market Debt Hard Currency, Local Currency and Corporate Debt Funds.
