Tag Archives: brian-haskin

Prudential Launches Global Absolute Return Bond Fund

By DailyAlts Staff Prudential Investments has a reputation for being a “blue-chip” or conservative asset manager – it even has the word “prudent” right in its name. With those who suggest unconstrained or absolute-return bond funds are inherently imprudent or especially risky, Prudential would beg to differ – the firm’s lineup of so-called “nontraditional” bond funds recently extended to three with the launch of the Prudential Global Absolute Return Bond Fund (MUTF: PAJAX ). The Prudential Global Absolute Return Bond Fund is essentially the international version of the well-established Prudential Absolute Return Bond Fund (MUTF: PADAX ). Both funds have an “absolute return” mandate, which means they pursue long-term positive returns, regardless of market conditions. What makes the new fund different is that it keeps at least 40% of its assets invested in foreign securities, including those from emerging markets. Prudential’s new fund is managed by Michael Collins, Robert Tipp, and Arvind Rajan, all of whom are managing directors at the firm. Mr. Collins is also Prudential’s Senior Investment Officer, while Mr. Tipp is Chief Investment Strategist and Head of Global Bonds, and Mr. Rajan is Head of Global Macro. Together, the three portfolio managers invest the new fund’s assets in a wide variety of asset classes – including bonds and other debt instruments, mortgage- and asset-backed securities, currencies, and derivatives – in pursuit of its investment objectives. They also target the fund’s “dollar-weighted effective duration” at -5 to +5 years. As stated earlier, this is at least the third nontraditional bond fund in Prudential’s lineup – the others include the Prudential Unconstrained Bond Fund (MUTF: PUCAX ) and the previously mentioned PADAX. PUCAX, which launched on July 9 of this year, had respective one- and three-month returns of +2.02% and -0.59%, through October 31, ranking in the top 8% and 36% Morningstar’s Nontraditional Bond category for the respective periods. PADAX, which debuted in March of 2011, returned +0.93% and -0.52%, respectively for the one and three months ending October 31, but a more impressive +1.27% (annualized) for the three years ending this most recent Halloween. Shares of the new Prudential Global Absolute Return Bond Fund are available in A (PAJAX), C (MUTF: PAJCX ), Q (MUTF: PAJQX ), and Z (MUTF: PAJZX ) classes. A and C shares have respective net-expense ratios of 1.20% and 1.95%, while Q and Z shares both have fees of 0.95%. Both A and C shares have minimum initial investments of $2,500, while Q and Z shares have no minimum for qualifying investors. For more information, view a copy of the fund’s prospectus . Past performance does not necessarily predict future results.

AlphaClone Goes International With New Downside Hedged ETF

By DailyAlts Staff AlphaClone’s proprietary Clone Score methodology is used to power its popular AlphaClone Hedge Fund Downside Hedged Index and the related AlphaClone Alternative Alpha ETF (NYSEARCA: ALFA ), which was launched in 2012 and now has approximately $155 million in assets. On November 2, the firm launched a new index, the AlphaClone International Downside Hedged Index, that also uses the Clone Score methodology but is focused on American Depository Receipts (“ADRs”) – certificates that trade in the U.S. but represent shares of foreign stocks. As a follow on, AlphaClone launched a new ETF to track the new index, the AlphaClone International ETF (NYSEARCA: ALFI ). In Pursuit of Alpha “Pursuing the potential for alpha is even more important today for long-term investors, given the anemic growth forecasted for equities and bonds over the next several years,” said AlphaClone CEO Maz Jadallah, in a recent statement. “We’re delighted to introduce an international version of our index, further expanding the number of alpha-seeking index strategies available to global investors.” The new index will consist of at least 40 “high conviction” ADRs selected from the regulatory filings of select institutional investors. The proprietary Clone Score is used to continuously rate managers based on the “efficacy of following their disclosures,” and then aggregates the high conviction holdings from the managers with the highest scores. The index also features a “dynamic hedge” that introduces short-selling when the S&P 500 closes below its 200-day moving average at any month’s end. “Having seen success with our methodology inside separately managed accounts over the past five years, we’re excited to further expand access to our innovative investment methodology and are committed to helping long-term investors succeed,” Mr. Jadallah said. More detailed information about the index and its calculation methodology (see “Guidelines” document link) can be found here: AlphaClone International Downside Hedged Index . New International ETF AlphaClone’s new ETF, the AlphaClone International ETF, aims to track the new international index. As is the case with the index, the fund can hedge the long portfolio based on a trend following signal, and will use an MSCI EAFE Index based security to hedge the portfolio. The advisor to the fund is Alpha Clone Inc., while the sub-advisor is Vident Investment Advisory, LLC. Fees on the ETF are 0.95%, which is the same as the U.S. equity focused AlphaClone Alternative Alpha ETF. Earlier this year, AlphaClone announced its plan to launch four new ETFs based on the Clone Score methodology, including one that will be based on the new index. In addition, the firm announced in September that it had received a $2.25 million venture investment from Operative Capital , allowing it to expand its marketing and sales operations.

Market Neutral Funds: The Best And Worst Of September

Market-neutral funds are a subset of long/short equity strategies. Both market-neutral and more standard long/short equity strategies combine both long and short positions in stocks to mitigate portfolio volatility and to capitalize on the downside of correctly identified underperformers. But while traditional long/short strategies typically remain net long , market-neutral funds aim to balance their long and short holdings to generate returns that are entirely uncorrelated with the broad market. Alternative mutual funds pursuing market-neutral strategies provide investors with professional security selection and portfolio management. These funds, which aim to achieve positive returns regardless of overall market conditions, eked out a tiny aggregate gain of 0.12% in September, according to Morningstar, but there were several that greatly outperformed – and others that posted significant monthly losses. Top Performing Funds in September The Invesco All Cap Market Neutral Fund (MUTF: CPNAX ) was the top-performing mutual fund in Morningstar’s Market Neutral category for September, returning +7.03% for the month. This brought the fund’s year-to-date gains through September 30 to +7.63%. In the third quarter, the fund posted huge gains of 15.01%, boosting its one-year returns to +8.64%. The fund, which debuted in December 2013, had assets under management (AUM) of $32.1 million, accounting for just a tiny fraction of the category’s $25 billion total AUM. The AQR Equity Market Neutral Fund (MUTF: QMNIX ) was the second-best performer in the category in September, gaining 5.79% for the month. The fund, which debuted October 7 of last year and had $127.6 million in AUM as of October 19 of this year, gained an impressive 14.99% in the first nine months of 2019. Finally, the Vanguard Market Neutral Fund (MUTF: VMNIX ) rounded out the category’s top-three performers with September gains of 5.11%. Unlike the other funds mentioned thus far, which have debuted in the past two years, VMNIX has a much longer track record – through September 30, the fund had generated respective three- and five-year returns of +6.19% and +4.67%, easily besting the category averages of +1.04% and +1.49%, respectively. The fund debuted on October 19, 2008 and had $446.2 million in AUM precisely seven years later. Worst-Performing Funds in September The worst-performing market-neutral mutual funds for September were: Castlerigg Event Driven and Arbitrage Fund (MUTF: EVNTX ) Visium Event Driven Fund (MUTF: VIDIX ) The Arbitrage Event-Driven Fund (MUTF: AEDNX ) The Castlerigg fund debuted in February 2015. It lost 4.72% in September and a painful 10.37% in the first nine months of 2015 – ouch! The fund had just $10.3 million in AUM, as of October 19. The Visium fund is another small and underperforming market-neutral fund. It lost 4.70% in September, barely outpacing Castlerigg, and it was down 9.14% for the year ending September 30. The Visium fund’s AUM, as of October 19, were $23.4 million. Finally, the Arbitrage Event-Driven Fund rounded out September’s list of market-neutral underperformers, with monthly losses of 3.73%. But this much bigger fund, which debuted in 2010 and had $357.5 million in AUM as of October 19, has a much longer track record than last month’s other laggards: For the five years ending September 30, 2015, the fund returned an annualized +0.63%. Unfortunately for investors who didn’t buy in before 2012, the fund’s returns for one- and three-year periods, as well as three- and nine-month terms, were all negative. Conclusion A recent white paper by Northwestern Mutual further explains the benefits and drawbacks of market-neutral strategies and market-neutral mutual funds in particular. According to Northwestern, these funds “tend to generate consistent returns that are above the historic U.S. Treasury Bill rate (3-6%) whether the market is up or down” – and this makes them particularly attractive amid the current market environment.