In this edition of Odds & Ends:
- Natixis to Acquire NextGen Financial
- Market Volatility Tops List of Concerns for Advisors
- First Quadrant Offers Australian Investors Liquid Alts Strategy
- Hedge Fund Peril: Allocating Too Little
- Ultimus to Provide Mutual Fund Servicing for BPV
Natixis to Acquire NextGen Financial
Natixis Global Asset Management announced the acquisition of NextGen Financial Corporation on October 24. The deal was priced at $7.25 per share in Canadian dollars (CAD), giving NextGen a total enterprise value of $35 million CAD. Natixis agreed to pay a 107% premium above NextGen’s October 23 trading price of $3.50 CAD per share.
NextGen is considered to be an innovative firm with a strong management team and a solid lineup of mutual funds. John Hailer, CEO of Natixis in Asia and the Americas, said his firm was honored to build on the legacy established by NextGen’s founder, James Hunter. “Together with NexGen, we will be better positioned to serve the market with our worldwide network of affiliated investment managers,” Hailer said, in a press release announcing the acquisition.
Market Volatility Tops List of Concerns for Advisors
Eaton Vance’s Advisor Top-of-Mind Index is a survey conducted every three months using similar methodology as the U.S. Consumer Confidence Index. The Advisor Top-of-Mind Index, which is set to a baseline average of 100 for April 2014, gauges the concerns of investment advisors and their clients, and “protecting their wealth from market volatility” was the top result of this quarter’s survey with a reading of 103.6 (up from last quarter’s 102.2). “Generating income” fell to second place on the Index with a 99.7 rating, down from 105.1 in the previous quarter; and “capital appreciation” and “raising taxes” brought up the rear with respective readings of 85.5 and 82.0. The results were further summarized in an October 28 press release.
First Quadrant Offers Australian Investors Liquid Alts Strategy
Thanks to First Quadrant, one of world’s largest standalone active currency managers, Australian investors now have the opportunity to invest in a liquid alternative strategy focused on currency trading. The FQ Global Alternative Return Fund, which launched back in July, takes long and short positions in 11 developed currency markets in attempting to deliver its investment objective of positive returns over full market cycles. The fund’s portfolio is designed to be uncorrelated to stocks and bonds, as well as other alternative strategies.
Although the FQ Global Alternative Return Fund debuted as an Australian Unit Trust earlier this year, the strategy was established in 1992 and accounted for more than one-third of First Quadrant’s $19 billion in assets under management, as of July 15. “We are known to Australian institutional investors, having built a presence here since the 1990s,” said Jeppe Ladekarl, the fund’s portfolio manager, in a press release announcing its Unit Trust launch.
Hedge Fund Peril: Allocating Too Little
At the request of Risk Magazine, MPI Research conducted an in-depth examination of the relationship between hedge-fund allocation scale and hedge fund selection on the total returns of pension funds. MPI’s calculations used a model portfolio based on CalPERS’ portfolio, and their research seems to agree with Ted Eliopoulos: a 1% allocation to hedge funds “hardly changes the portfolio profile,” in MPI’s words. However, rather than justifying the termination of CalPERS’ hedge fund program, MPI’s research indicates a larger allocation may have been advisable.
With a 1% hedge fund allocation, neither fund selection nor time horizon really matter, according to MPI’s findings. Instead, MPI suggests a 10% allocation, which “can offer a return greater than the base portfolio over the past 3 years;” or a 5% allocation, which “consistently offers a greater Sharpe ratio than the base portfolio over the past 3 or 7 years.” Portfolio risk was also “consistently decreased” by the 5% and 10% allocations, compared to the base portfolio.
A thoroughly detailed review of MPI’s findings can be read on their blog post.
Ultimus to Provide Mutual Fund Servicing for BPV
Ultimus has been chosen to provide mutual fund servicing to the BPV family of funds, in what was described as “the latest in a series of wins for Ultimus” in an October 16 press release. Ultimus will provide BPV with a broad range of services, including fund administration, financial reporting, distribution strategy, accounting, and transfer agent services. Mike West, Senior Partner and CEO of BPV Capital Management, called Ultimus a “great partner” in the operational space. Bob Dorsey, Co-Founder and Managing Director at Ultimus, said his company is “excited to partner with such a top-notch firm” and to help BPV achieve their full potential.