Bear market fund

Premier Asset Management has announced the launch of a fund designed to withstand a downturn in equity markets, with a strong conviction to capital protection during bear markets.

According to Premier managing director Brian Carley, the fund was started to satisfy the needs of many of its larger investors who have capital protection as their first priority and investment returns as a close second.

“The fund aims to provide the investor equity market plus returns during bull markets and capital protection during bear markets, which is important given the uncertainty in the markets,” he said.

What differentiates the fund is that regardless of which way the market moves, investors will be covered; it’s essentially a market neutral strategy, Carley said.

“The fund is able to survive down markets in two ways. Firstly, we can hedge to the equivalent of 100 per cent cash. Secondly, we have an authority to have 30 per cent in a long-short situation.

“This is something that investors had been calling out for, but the industry had failed to provide,” Carley said.

The fund began trading in June 2007 and was launched on the back of Premier’s older fund, Global Select Fund, which it ran for Sandhurst Trustees.

“Our major philosophy is that tactical asset allocation can greatly increase the risk-adjusted return to an investor, and that you’ve got to be aggressive in your asset choice allocations. A number of our clients from the original fund conveyed to us that they’d had a good run and would like to go to 100 per cent cash,” he said.

According to Carley, the fund employs a top-down strategy, “so we look at which geographic area is the strongest by applying a quantitative model, and then we look at the strongest sectors within that country”.

“This is an absolute return fund, with no formal benchmarks in order to get the best out of bull markets, but reserve capital in bear markets. For instance, in strong bull markets we are able to leverage our investments up to 160 per cent,” Carley said.