Citywire Selector - For Professional Investors

Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

How to handle a fund soft closing: a selector's view

How to handle a fund soft closing: a selector's view

Investors have been drawn to absolute return funds by their resilience to market turbulence and new investment ideas. However, their popularity means these funds can quickly reach capacity.

In the latest edition of Selector Snapshot, a fund selector shares the process that he goes through when one of his preferred funds soft-closes.

Selector: Andreas Marnett

Company: Sal. Oppenheim (Germany)

We like absolute return strategies with new approaches, but successful funds in this area sometimes reach their capacity limits very quickly as the demand in the industry is very high. After that, you have to find alternative opportunities to invest in.

When we are invested in a fund that is being closed we have to review the investment. If it no longer fits our criteria, we consider selling the fund.

We also review a fund that reaches its capacity limit before it is closed. So, we talk to the fund managers and to the fund companies. If we expect the fund volume to increase further, we will probably sell the fund.

The criteria we use for evaluating funds depend on the nature of the fund. For example, there are different limits for a small-cap fund compared to a large cap long/short equity fund. It depends on the investment universe and on the sector.

A well-diversified quant fund with 150 securities in a big universe will be treated differently than a fund which focuses on picking, say, 25 securities from a smaller investment universe.

Performance

After last year, several long/short equity and market neutral funds reopened after investors had taken money out of them. Funds often reopen because investors take their money out due to underperformance or drawdowns.

Last year, many fund managers disappointed and lost money in the absolute return space. As a consequence, many investors lost their patience and look for alternatives.

Among long-only funds it is easier to find funds that outperform the benchmark this year compared to 2016. Absolute return funds have performed better so far in 2017, too. Last year was tricky because of major events such as Brexit, the election of Donald Trump, or the big sector rotations.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Events
  • Citywire Alternative Ucits Retreat 2017

    Citywire Alternative Ucits Retreat 2017

  • Citywire Milan 2017

    Citywire Milan 2017

  • Citywire Paris 2017

    Citywire Paris 2017

  • Citywire Deutschland 2017

    Citywire Deutschland 2017

  • Citywire DACH 2017

    Citywire DACH 2017

  • Citywire Italy 2016

    Citywire Italy 2016

  • Citywire Milan 2016

    Citywire Milan 2016

  • Citywire Alt Ucits 2016

    Citywire Alt Ucits 2016

  • Citywire Berlin 2016

    Citywire Berlin 2016

  • Citywire Switzerland 2017

    Citywire Switzerland 2017

  • Citywire Amsterdam 2016

    Citywire Amsterdam 2016

  • Citywire Montreux 2016

    Citywire Montreux 2016

  • Citywire Deutschland 2016

    Citywire Deutschland 2016

  • Citywire Latin America 2016

    Citywire Latin America 2016

  • Citywire Milan 2016

    Citywire Milan 2016

  • Citywire Munich 2016

    Citywire Munich 2016

  • Citywire Paris Alt Ucits 2016

    Citywire Paris Alt Ucits 2016

  • Citywire Zurich Alt Ucits 2016

    Citywire Zurich Alt Ucits 2016