S&P’s review, covering six managers offering 10 rated capabilities, was conducted in February 2012. 

“This year’s annual review of alternative multi-asset products comes on the heels of difficult 2011 year-end performance,” said S&P fund analyst Jason Patton. 

“With all asset classes still struggling to win investors away from cash, we expect developments in Europe will dictate overall appetite for investment products other than defensive ones in the current environment,” said Mr Patton. 

Against this backdrop, managers are tailoring products to offer efficiency gains and improved protection in negative markets. In other key findings: 

• Managed futures and other “long volatility” profile strategies are garnering greater allocation within FoHFs.
• The distinction is increasingly apparent between products with high equity beta characteristics and those showing a more “alternative” return profile with limited equity beta exposure.
• The ready availability of ETFs and alternative beta products is putting fee pressure on strategies with higher levels of traditional asset class betas, including many classic FoHFs.

5 July 2012

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No fund ratings have changed for managers returning from the previous year’s sector review. The peer groups cover funds-of-hedge-funds and multiple strategy single-manager offerings.

S&P Fund Services analyst, Michael Armitage said: “Fund performances over 12 months to December 2011 were mixed depending upon a strategy’s equity market correlation. Strategies with more long equity market exposure exhibited positive performance in the fourth quarter of 2011 in line with general equity market performance”. 

Generally, funds-of-hedge-fund indices experienced slightly negative to flat performance over the course of 2011—which was a difficult environment for many alternative styles. Several managers outperformed in these conditions, including Dexia Alpha Dynamic and HFA International Shares funds.” 

“The stability shown in our ratings underscores our previous conviction in the peer group offerings. Major themes of this year’s review continue to focus upon liquidity of underlying holdings and ‘truer’ alternative return profile strategies in fund-of-fund portfolios,” said Mr Armitage.

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