Deutsche Adds a Long-Short Equity Fund to its Liquid Alts Lineup

Deutsche Adds a Long-Short Equity Fund to its Liquid Alts LineupLeveraging its #1 rated alternative investments managed accounts platform, Deutsche Asset & Wealth Management (DeAWM) has launched its sixth liquid alternative mutual fund. The new DWS Strategic Equity Long/Short Fund (ticker: DSLAX, inception date: 5/15/2014) uses the firm’s managed accounts investment team for its manager research and due diligence expertise, and to determine the optimal asset allocation among the sub-advisors in the fund in an attempt to provide optimal long term risk adjusted returns.

The new fund from DeAWM employs a multi-manager approach and allocates the fund’s assets among separate sub-advisors that use a variety of long/short investment strategies. The fund launched with more than $200 million in assets, according to Morningstar. Chris Unscheid and Claudia Roering are the Portfolio Managers from the fund’s advisor, Deutsche Investment Management Americas (DIMA).

The Head of DeAWM’s Alternative & Fund Solutions (AFS) group in the Americas, Bernard Abdo notes, “DWS Strategic Equity Long/Short Fund is a great example of DeAWM’s competencies coming together in a product that will allow investors to diversify their equity exposures and capitalize on market opportunities.”

The table below shows the four sub-advisors and investment strategies of the fund:

Investment Strategy Sub-Advisor
Developed Equity Long/Short Omega Advisors, Inc.
Developed Equity Long/Short Atlantic Investment Management, Inc.
Global Equity Long/Short Chilton Investment Company, LLC
Global Equity Long/Short Lazard Asset Management LLC

 

One of the challenges in the industry is finding high quality hedge fund managers who are willing to forego their incentive fees and manage assets in a mutual fund in exchange for potentially stickier assets, or at least assets from a different investor base. DeAWM seems to have cracked that issue with this fund. “The four sub-advisors of the fund are all top players in the industry, and we believe their complementary approaches to long/short investing will be attractive to prospective investors,” says Martin Fothergill, who heads DeAWM’s AFS’ global hedge fund group.

The management fee on this fund is 1.75%, which is the highest among all the DWS alternative mutual funds and well above the category average of 1.24% (all long/short equity mutual funds and ETFs, per Morningstar’s categorization.) However, the fee is relatively consistent with other similar multi-manager mutual funds that have been launched over the past year, including the Balter Long/Short Equity Fund at 1.95%, the Neuberger Berman Long Short Multi-Manager Fund at 1.96% and the Dreyfus Select Managers Long/Short Equity Fund at 2.00%.

Other alternative mutual funds from Deutsche Investment Management are as follows:

  • DWS Alternative Asset Allocation Fund (Ticker: AAAPX, Multi-Strategy)
  • DWS Select Alternative Allocation Fund (Ticker: SELAX, Multi-Strategy)
  • DWS Diversified Market Neutral Fund (Ticker: DDMAX, Market Neutral)
  • DWS Enhanced Commodity Strategy Fund (Ticker: SKNRX, Commodities Broad)
  • DWS Gold & Precious Metals Fund (Ticker: SGDAX, Equity Precious Metals)

More Long/Short Equity Funds in Registration

According to Morningstar, the long/short equity category currently has 119 funds, including both mutual funds and ETFs. The DWS Strategic Equity Long/Short Fund was the sixth new long/short fund to enter the category this year. A new long/short equity fund from Stone Toro that was launched the day after the DWS fund is the seventh. Additional long/short equity funds that are in registration and due out later this year (some sooner rather than later) include the following:

As equity markets continue to rally and investors look to take some equity risk off the table, long/short equity funds have proven popular. The new DWS fund adds to the growing list of funds that are available to investors who are looking to access traditional hedge fund managers through the mutual fund market.

Meili Zeng contributed to this article.

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