From Geneva to Asia

Last week Pictet announced a new long/short Ucits III fund with a China focus. Surprisingly, the Pictet Total Return Mandarin fund will be one of the few Ucits alternative strategies that plug into the Asia and emerging market megatrend themes ... for now.

Some others include Matrix Asia Ucits, Schroder GAIA Sloane Robinson Emerging Markets, and GAM Star Absolute Global Emerging Markets. Brevan Howard is launching an emerging markets foreign exchange Ucits and opening an office in Sao Paolo Brazil.

But Pictet and its new fund may be especially worth following. The Swiss private bank turned itself into one of the most successful global money managers in a very short time.  The fifth best selling fund so far in 2010 is Pictet Emerging Local Currency Debt, with $6 billion in net flows according to Strategic Insight’s Simfund GL database. Pictet’s Global Emerging Debt fund got another $1 billion of flows this year.

The firm is raising not just money, but also the visibility of its brand. I just came back from Hong Kong, where Pictet has put its name on the many trams (locally known as “ding ding”) that crisscross the town.

Pictet's globalization has been remarkable as the firm spread out from Geneva to Tokyo (and had the best selling fund in Japan in 2007), and to Hong Kong and Asia today. Its Ucits range continues to expand around new themes, with alternatives also becoming more visible. The Mandarin strategy will follow the group’s Corto Europe product, its first long/short Ucits introduced in April that now has $300 million of assets.

As the mega-themes of China, Asia, and Emerging Markets play out, attracting more investments by the day, contrarians are beginning to worry. If they are right, then less-constrained long/short strategies, volatility and event risk plays, prudent use of leverage, systematic trading and other alternative approaches may provide more opportunities to generate alphas and absolute returns with distinct risk profiles.

Complex alternative Ucits/Newcits however are being questioned by Hong Kong and other Asian regulators, and concerns about the global Ucits brand remain unsettled.

Meanwhile, the connections between emerging markets and absolute return are growing.

Eaton Vance just announced it would soft close its $6 billion Global Macro Absolute Return fund, a U.S. mutual fund that absorbed 85% of its assets just this year. The strategy invests in both developed and emerging market investments.

As that fund soft closes, Eaton Vance is launching the new Global Macro Absolute Return Advantage, featuring more concentrated, high conviction allocations – and going by the company’s marketing and information materials (see the microsite), emerging markets may play an even bigger role in this one.

~ Jag Alexeyev

Public Content, Subscriber Content Asia, Emerging Market, China, Brazil, Global Macro, newcits