The Triple3 Volatility Advantage Fund, which is distributed in the Australian market by Grant Samuel Funds Management, aims to generate long-term absolute returns with its volatility-focused strategy to capture alpha from highly liquid exchange-traded VIX options, which are negatively correlated to equities.

“The “Recommended” rating indicates that Lonsec has strong conviction the financial product can generate risk-adjusted returns in line with relevant objectives and that the financial product is considered an appropriate entry point to this asset class or strategy.

“The Fund is relatively simple in design and has intuitive appeal,” Lonsec says.

“It invests in exchange traded VIX options which are liquid and regularly priced. The Fund is heavily concentrated in just a few securities; VIX options, cash and cash-like securities, however given the nature of the strategy, Lonsec considers this to be an appropriate approach.

“From a broader portfolio construction perspective, the Fund is an appealing diversifier from traditional equity market risk.

“The Fund is expected to be causally negatively correlated to US equities when needed most (in times of falling equity markets),” Lonsec says.

Damien McIntyre, director and head of distribution with Grant Samuel Funds Management, says the rating is timely, and will increase the appeal of the Fund to the retail market.

“Investing in volatility is at the forefront of investor activity in the United States, and this is increasingly being reflected in the investment range available there.

“There are 22 VIX based exchange traded products that operate in the US market.  But until the launch of the Triple 3 Volatility Advantage Fund there was not one VIX based product in the Australian market.

“Investing in volatility provides the ability to diversify in ways that asset classes can’t, and Australian investors can invest in volatility through this Fund,” Mr McIntyre says

The Fund also has a AA rating from van Eyk.

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The fund is managed by the New York-based equity manager, Epoch Investment Partners, and is unique in the Australian market place as it offers a globally diversified equity portfolio of listed global companies with a history of attractive dividend yields and positive growth in free cash flow.

Mr Damien McIntyre, director and head of distribution with Grant Samuel Funds Management, says: “The Grant Samuel Epoch Global Shareholder Yield Fund aims to generate superior risk-adjusted returns with a dividend yield that exceeds the dividend yield of the MSCI Word (ex Australia) Index.

“Companies in the portfolio are run by management that focus on creating value for shareholders through consistent and rational capital allocation policies, with an emphasis of cash dividends, share buy-backs and debt reduction – the key components of shareholder yield.

“To date the fund has offered lower volatility than most equity products and distributed higher levels of income. This has proven to be of great interest to self managed super fund investors with about 20 per cent of funds’ net cash flows to date coming from SMSF investors,” Mr McIntyre says.

The addition of the fund to the FirstChoice platform follows the announcement earlier this year that the fund had surpassed the $1 billion market in retail assets under management, and had more than doubled its size over 12 months.

Launched to institutional investors in October 2007 and to retail investors in May 2008, during the GFC, Grant Samuel Funds Management has also raised over $1.5 billion in institutional money for Epoch Investment Partners in Australia.

The Grant Samuel Epoch Global Equity Shareholder Yield Fund is also on the platforms of all the major banks and life insurers. It has an A rating from van Eyk Research, and a “Recommended” rating from Lonsec and Zenith.

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Simon Ho

Grant Samuel Funds Management and Triple3 Partners have warned investors not to take market returns for granted, as the CBOE volatility index – the VIX – hits near record lows.

The VIX index, often referred to as the Fear Index, is a measure of expected volatility on the S&P500 Index over the next 30 days. High VIX readings mean investors see significant risk that the market will move sharply, either up or down.

The VIX hit a low of 11.32 in May, and in the past a low VIX has frequently been a harbinger of significant market falls, says Mr Simon Ho, founder and chief investment officer of Triple3 Partners.

“This period could be the calm before the share market storm,” he says.

“The last time the VIX was at these low levels was at the start of 2007, the period immediately before the onset of the GFC.

“I expect that volatility levels will start to climb higher by the end of 2014, with a lot of uncertainties ahead for world economies.

“There is the housing bubble in China which will start to deflate at some point, the experimental quantitative easing taking place in Japan which will have unknown consequences, and the US’ decision to unwind its quantitative easing program which should see asset prices and risk premiums in that country return to more normal levels.

“Throw into the mix the conflagration in Eastern Europe, and the Euro-zone being on the verge of deflation, and you have a number of banana skins on the road ahead, waiting to trip-up the unwary.

“The backdrop against this is that equities are very fully priced. We have seen five years of a bull market where the S&P has gone from a low of 666 to sit at its current levels above 1900.

“Investors can’t afford to be complacent about their portfolio diversification,” Mr Ho says.

Along with a mix of equities, bonds, cash, alternatives and property, investors can also diversify by investing in volatility itself.

“Most investors see volatility as risk, but it is increasingly being recognised as a distinct asset class, and one which offers a largely untapped source of portfolio returns that are largely uncorrelated to equities.

An investment in volatility can be accessed through the VIX with the use of options and volatility derivatives. Mr Ho says it is a good natural diversifier.

VIX options have been one of the fastest growing option markets in recent years and now rank as one of the world’s most liquid – regularly trading over 1 million options contracts per day.

The Triple3 Volatility Advantage Fund, which is distributed in the Australian market by Grant Samuel Funds Management, aims to generate long-term absolute returns with its volatility-focused strategy to capture alpha from highly liquid exchange-traded VIX options, which are negatively correlated to equities.

Mr Damien McIntyre, director and head of distribution with Grant Samuel Funds Management, says: “The investment strategy is expected to perform best in periods where the S&P is falling. In periods where the S&P is choppy, the investment strategy is expected to generate positive returns, and where the S&P remains stable or increases only steadily, the investment strategy is expected to generate cash-like returns.”

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Simon Ho

Grant Samuel Funds Management and Triple3 Partners have formed a partnership that will see Grant Samuel distribute the newly launched Triple3 Volatility Advantage Fund to the Australian market.

Mr Damien McIntyre, director and head of distribution with Grant Samuel Funds Management, says Triple3 offers products and strategies that fill a genuine need in the Australian market – that of real and sustained portfolio diversification.

“Australian superannuation portfolios currently have the second highest allocation to equities in the world, at 54 per cent. They generally have high allocations to Australian equities for dividends and franking credits and to global equities, real estate investment trusts and listed infrastructure for income.

“Traditionally investors have sought to diversity their equity risk by investing in bonds, cash and more recently, other non traditional assets such as alternatives, with varying levels of success.

“Many alternatives strategies actually show strong positive correlation to equities, rendering them far less effective diversification tools for standard portfolio,” Mr McIntyre says.

Simon Ho, founder and chief investment officer of Triple3 Partners, says volatility has emerged as a distinct asset class in recent years that offers a largely untapped source of alpha for investors’ portfolios.

“With low correlation to other asset classes, volatility can be used to enhance returns and manage risk, and can be accessed through the VIX Index with the use of options and volatility derivatives.

“The volatility inherent in options markets is negatively correlated to traditional assets. It is possible to hedge out the risk of holding equities via options on the VIX Index. Although this has been recognised in international markets, it is relatively unused as a diversification option in Australia,” Mr Ho says.

The VIX Index, often referred to as the Fear Index, is a measure of expected volatility on the S&P500 Index over the next 30 days. High VIX readings mean investors see significant risk that the market will move sharply, either up or down.

“The level of volatility tends to be negatively correlated to equity indices, indicating that when equity markets fall, volatility tends to rise and vice versa. Options on the VIX Index allow investors to access this feature, which cannot be as reliably harnessed in other asset classes, making VIX an ideally suited instrument for targeting returns that are negatively correlated to the S&P500.”

VIX options have been one of the fastest growing option markets in recent years and now rank as one of the world’s most liquid – regularly trading over 1 million options contracts per day.

The Triple3 Volatility Advantage Fund, which will be distributed in the Australian market by Grant Samuel, aims to generate long-term absolute returns, which are negatively correlated to equities.

“The fund aims to deliver cash-like returns in periods when global equity markets rise or are flat, positive returns when markets are choppy and strong positive returns in periods when global equity markets fall,” Mr Ho says.

Mr McIntyre says the depth of experience and understanding of volatility in markets demonstrated by Triple3 means it was an easy decision to partner with the consultant and fund manager to distribute its funds in Australia.

“Triple3 has a seven year history and are recognised experts in the field of volatility. In addition to a role as an investment manager, Triple3 is a dedicated volatility research house and sells its research to professional investors as well as consulting to stock exchanges around the world,” Mr McIntyre concludes.

Planned Fund Features

• Easy access to the potential diversification benefits of volatility
• Daily liquidity
• Only deal in liquid exchange traded options and cash instruments
• Only deal in vanilla options; calls and puts
• Precise risk controls – limit loss to 5% in a VIX expiry month
• Proven track record of delivering targeted return streams
• No OTC derivatives
• No ISDA required
• No complex or hard to value instruments
• No lock-ups
• No gate
• The fund is not a serial options seller
• The fund is not a tail risk hedge

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Grant Samuel expands into Brisbane.

Grant Samuel Funds Management has opened a representative office in Brisbane, and made a new appointment in Sydney, following a doubling in business demand over the past 12 months, says Mr Damien McIntyre, director and head of distribution at Grant Samuel.

This move follows Grant Samuel’s decision to open a representative office in Perth 12 months ago, significantly increasing its business development capabilities.

“The time is right to have a person on the ground in Queensland,” Mr McIntyre says.

“Queensland is estimated to represent 20 per cent of the retail market for financial planner/dealer groups and we felt it required a dedicated business development manager.”

Mr Steven Taylor, who has nearly 20 years experience in the industry, has been appointed State Manager for Queensland and will head up the Brisbane office.

“Steven will focus on developing our client base in greater Brisbane and Far North Queensland,” Mr McIntyre says.

Mr Taylor joins Grant Samuel from Challenger Group, where he was State Manager, Queensland during a time of successful growth in Challenger’s annuity and investment funds. Prior to that, he was with Credit Suisse Asset Management, Skandia and Macquarie Bank.

Increased demand in New South Wales, and a need for greater business development capability, has resulted in the appointment of Mr Shaun Thomas as a key account manager based in Sydney.

“NSW accounts for approximately 35 per cent of all financial planners in Australia, and Shaun will work alongside key account manager David Blair, in sharpening Grant Samuel’s focus on the key NSW market.”

Mr Thomas joins Grant Samuel from Australian Unity Investments and has over 10 years experience in business development. He has held a number of senior business development roles at Australian Unity Investments, HSBC Global Investments and Macquarie Investment Management.

“Grant Samuel Funds Management now has the key markets in Australia covered with people on the ground, significantly boosting our business development capabilities.

“The opening of the Brisbane and Perth offices, and the new appointment in Sydney, sets us up well for what is expected to be another big year in 2014,” Mr McIntyre concluded.

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