The recognition for the strategy follows the recent opening of CFM’s permanent Australian office in Sydney at the end of last year.

CFM’s Head of Asia Pacific, Steve Shepherd, said that Australian investors are increasingly seeking out alternative strategies to help diversify their portfolios.

“The trend following strategies we manage are designed to be liquid, low-cost and transparent, and are intended to be de-correlated from traditional benchmarks. They are absolute return strategies, which means they aim to perform in all market conditions, and can help smooth portfolio returns over the long-term.

“ISTrends invests in long-term trend following strategies, which seek to capture momentum effects and price trends across a range of markets, including equities, currencies, bonds and interest rates, using a systematic or quant-based investment process,” Mr Shepherd explained.

Zenith’s ratings were announced in its 2018 Managed Futures & Global Macro/Absolute Return Sector Report, which evaluated 22 funds in the sector across a range of different metrics, and concluded by revalidating “the diversification benefits that managed futures introduced to a traditional portfolio.”

CFM ISTrends Class B was rated for the first time, with Zenith noting it is well placed to achieve its investment objectives, “underpinned by CFM’s impressive pedigree in quantitative investing”, and that the fund “provides a highly attractive trade-off between investment merit and cost”.

Lonsec’s ratings were announced in its 2018 Alternatives Sector Review. There were nine ratings changes and 15 new strategies reviewed for the first time. Only five were awarded “Highly Recommended”, including CFM IS Trends Trust Class A & B.

‘Highly Recommended’ is Lonsec’s highest rating and means Lonsec has a “very strong conviction that the fund can generate risk adjusted returns in line with relevant objectives.”

Winston Capital Partners distributes CFM producs to the Ausralian adviser market. Managing Director, Stephen Robertson commented:

“The quality of CFM’s funds is reflected not only in these excellent ratings, but in the strong demand we have experienced from institutional and retail investors. With these ratings, our investors now have yet more comfort that CFM is a world-class manager with proven strategies.”

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Steve Shepherd

Global quantitative asset manager CFM (Capital Fund Management LLP) has announced the addition of the CFM Institutional Systematic Diversified Trust (“CFM ISDiversified Trust”), one of its alternative beta fund range, to the IOOF platform.

Steve Shepherd, CFM Head of Asia Pacific, said that demand for cost-effective liquid alternatives is growing rapidly:

“Advisers and investors alike are seeking real, not illusory portfolio diversification in a liquid form. With its objective of providing long-term capital appreciation via returns that aim to be uncorrelated with traditional asset classes, the CFM ISDiversified program may answer this need. We are really pleased that more advisers can now access a diversified portfolio of investment strategies that aim to be de-correlated from traditional equities, thanks to the addition of CFM ISDiversified Trust to the IOOF Platform”, he said.

Mr Shepherd explained that alternative beta strategies seek to identify and exploit risk premia or behavioural anomalies in the financial markets, via a rules-based quantitative approach to investing.

“Traditionally, alternative beta strategies have been associated with hedge funds. Alternative beta strategies aim to produce returns in both rising and falling markets by using ‘alternative’ strategies, which aim to be decorrelated with traditional asset classes”.

The problem for advisers and their retail clients is accessing these strategies in a meaningful way. This is where CFM ISDiversified Trust fills the gap, offering a diversified portfolio of well-documented and persistent alternative strategies, but in a liquid form which advisers can easily access and at a lower cost than traditional hedge fund investments,” he said.

In addition to its listing on the IOOF Platform, CFM ISDiversified Trust is also available on seven major platforms: Macquarie Wrap, Netwealth, Colonial First State, BT Financial, Hub 24, Mason Stevens and Powerwrap. It has a ‘Recommended’ rating from both Lonsec and Zenith and is distributed in Australia through Winston Capital Partners.

In conclusion, Mr Shepherd said that alternative beta strategies may be a way to achieving portfolio diversification.

“Advisers and investors understand that true diversification is a key element in portfolio construction – but finding this diversification can be challenging. Alternative beta strategies such as the ISDiversified program are themselves diversified, but more importantly, have shown a low level of correlation to market movements in the way that equities and fixed interest are, spreading the risk and diversifying the portfolio,” said Mr Shepherd.

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Speaking about the decision to launch such a product, Steve Shepherd, Head of Asia Pacific, CFM, said that demand for long term trend-following and managed futures programs in Australia is growing exponentially, as advisers and investors alike seek real portfolio diversification, in a low-cost and liquid form.

This is highlighted by IS Trends Trust already being awarded the coveted “Recommended” rating by major ratings house, Lonsec. Lonsec notes that, “by undercutting the competition on fees, CFM has potential to disrupt a high margin sector”.

Mr Shepherd explained that IS Trends Trust is a diversified and managed futures trend-following trust, which capitalises on the fact that much of the returns from managed futures strategies can be explained by long term trend-following.

“Trend following has been shown to work for the past 200 years – it’s a strategy which takes advantage of trends in a large range of global assets and markets”, he said.

Long Term Trend Following is the core of many managed futures and CTA programs and is a well-known strategy amongst Australian financial advisers and investors.

According to Stephen Robertson, Managing Director of Capital Fund Management LLP’s Australian distributor, Winston Capital Partners, “CFM’s IS Trends Trust is a welcome addition to the Australian market.

Alternative beta strategies have been shown to provide strong returns over the medium to long term and are designed to perform in both rising and falling markets – all with a low correlation to traditional asset classes.

Financial advisers have been increasingly asking us for competitively priced, quality options in this space, but these have been few and far between.

And that’s where we believe IS Trends Trust may have some added value – it’s a managed futures trust that provides investors with access to long term trend-following in 5 asset classes in over 100 different markets. It is diversified and plays to the long term strength of CFM,” he explained.

With the launch of the CFM IS Trends Trust, investors will have two Unit classes to choose from. Class A has a 10% volatility target and class B has a 15% volatility target. Class A has a 0.6%pa management fee (capped MER of 0.8%pa) with 10% performance fee and Class B has a management fee of 1.125%pa (Capped MER of 1.45%pa) with 0% performance fee. Under RG97 these competitive fees will be welcomed by Australian advisers, managed account programs, wealth based multi manager funds and investors.

The CFM IS Trends Trust has already received a “Recommended” rating by major ratings house, Lonsec. Lonsec highlighted that CFM IS Trends Trust is well designed to provide a pure ‘trend following’ strategy and is “managed by CFM group’s high quality and experienced investment team which has a long and successful heritage in active quantitative hedge fund investing.”

In conclusion, Mr Shepherd said that “there is no question of the power of managed futures strategies in creating diversified portfolios, and that a research-based quantitative approach is an efficient way to access them”.

“CFM is one of only a handful of global investors to apply academic techniques to stringently test every investment strategy – and to be at the vanguard of the opportunity on offer from massive shifts in data proliferation globally.

“Our strategies are quant-based and well diversified across and within asset classes and markets, and executed with our systematic trading strategies.

“We have no doubt that our latest Australian Trust, IS Trends Trust, will provide advisers and their Australian clients with true diversification and access to the benefits of “long term trend following across multiple asset classes”.

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Commenting on the addition of CFM Institutional Systematic Diversified Trust to these major platforms, Head of CFM Asia Pacific, Steve Shepherd said advisers and investors alike are increasingly embracing the benefits of diversified alternative beta strategies as an essential part of their portfolios.

“Demand from advisers for CFM ISDiversified Trust has been growing, so we are really pleased that Macquarie and BT have given us this vote of confidence, and that advisers will now be able to access our fund more easily,” he said.

CFM is a pioneering global player in the alternative space, with a long track record.

They apply rigorous academic techniques to every investment strategy, and have been among the first to seize the opportunity on offer from massive shifts in data proliferation globally. Their alpha and alternative beta strategies include trading liquid financial instruments across global markets, including futures, equities, bonds, options and spot and forward foreign exchange.

Mr Shepherd explained that alternative beta strategies seek to identify and exploit alternative betas, or risk premiums, via a rules-based, quantitative approach.

“These kinds of strategies have historically been associated with hedge funds – which aim to produce ‘absolute returns’, in other words, to perform in a wide range of market conditions.

“Hedge fund managers employ a wide range of investment strategies not always available to other investors – and these ‘alternative’ strategies produce a return profile which seeks to be
un-correlated to traditional asset classes,” he explained.

Some of these alternative strategies have become well-established, such as long term trend following, and CFM thus believes they can be classified as alternative beta.

The CFM ISDiversified Trust combines a number of such well-established alternative beta strategies which are believed to persist over long periods of time, to provide some of the benefits of traditional hedge funds but in a lower cost, more liquid format.

In conclusion, Mr Shepherd said that the importance of diversification in a portfolio is key, particularly since the Global Financial Crisis (GFC), when asset classes previously thought to be uncorrelated moved together in a way investors did not expect.

“That’s where alternative beta strategies play such an important role. The strategies themselves are highly diversified.

“This is why we believe they can be used to lower volatility and smooth out returns seeking to provide sustainable returns over time, in a transparent, systematic way.” he said.

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