ML Capital Alternative UCITS Barometer Q2 2017

19 May, 2017

ML Capital Asset Management, the investment manager and promoter of the MontLake UCITS Platform, has published its 26th edition of the quarterly ML Capital Alternative UCITS Barometer (Barometer).

The Barometer is designed to help identify and anticipate key trends in the demand for the major strategies within the Alternative UCITS sector. The capital introductory team at ML Capital surveyed a diverse range of 50 investors who collectively manage over $90 billion and today invest upwards of $20 billion into Alternative UCITS. Respondents range from insurance and pension funds to private banking organisations, with a significant constituent of wealth managers that deal with the primary source of Alternative UCITS inflows, the mid-net-worth investor.

Some of the key highlights from the Barometer include:

•             Assets Rise In Quant Equity Market Neutral – Our research found that amongst the investors polled, Equity Market Neutral is experiencing large inflows with half increasing their holdings into Q2. A mere 8% intend to redeem out of this strategy in Q2 and our data has shown the strategy to be favourable across both Q1 and Q2. This has presented a contrast to Morningstar data that witnessed outflows in Equity Market Neutral through Q1, but this differential may be explained by our polled investor base allocating to the growing Quant Equity Market Neutral market, rather than Fundamental Equity Market Neutral.

•             Divergence In Developed Markets Equity Long/Short – Following a difficult 2016 for Developed Markets Equity Long/Short, investors entering into Q2 are overall increasing or maintaining their exposure, but not all expectations of this strategy are in accordance. Investors are making their investment decisions, shaped by their expectations of interest rate rises and potential correlation breakdowns along with their prediction of regional political outcomes and the risks they are willing to take amongst hopes for greater market volatility.

•             It's Still Trending! – Medium to Long-Term Managed Futures UCITS Funds continue to see large inflows following their gains in Q1. Many investors believe that CTAs will perform well during this benign rate rising environment. More niche short-term CTA strategies have gathered traction as investors look for further diversification. Amalgamations of Macro and Managed Futures in Multi-Asset Absolute Return products also continue to be popular.

Commenting on the highlights of the latest Barometer, Kenneth Sim, Head of Sales of ML Capital:

"It was a surprising start to the year. We have seen Global growth and US Equity markets reach new highs, rather than falling markets in the face of political concerns towards Trump's agenda and the European Elections. These rallying markets have suppressed volatility for yet another quarter, with the question hanging as to when it is likely to increase.

As Equity Markets Indices have reached these new highs, there has been ever increasing discussions as to how long this will continue and when it is likely we will witness some performance retracement. Through Q2 and likely the summer, investors are keenly observing markets for signs that might indicate the end of the recent US Equity bull market, especially as interest rates begin to rise periodically. We could begin to witness a reversal back to a normalised market, which will allow Alternative UCITS strategies to prosper.

I was very glad to see greater inflows into the Alternative UCITS market through Q1'17 and I hope that this is set to continue. In ML Capital's Q2 Barometer, a good portion of investors noted that they began hedging their Long Only exposures with Alternatives UCITS Funds within the last 12 months. The outlook for the sector is positive with assets set to rise especially as markets should provide a better opportunity set for Alternative UCITS strategies generally."

You can download the report by clicking here