SAN DIEGO — Nicholas-Applegate Capital Management Inc. this year is launching three 130/30 institutional mutual funds, a frontier fund that will include exposure to developed and emerging markets, and a global petroleum fund.
The San Diego-based firm is cashing in on investors' interest in high alpha-producing products amid lackluster equity markets, said Marna Whittington, managing director and chief executive officer.
The 130/30 mutual funds will be the first offered to outside investors by NACM, Ms. Whittington said. NACM has launched a Global Equity 130/30 fund, and plans to launch a U.S. Systematic Large-Cap Growth 130/30 fund and a U.S. Systematic Small-Mid Cap 130/30 fund. The strategies have been run in internally managed separate accounts for more than one year each, she said.
The strategies weathered the subprime storm that has battered many quant products, Ms. Whittington said.
The global equity 130/30 strategy in the separate account, which has $4 million in assets and was seeded on Jan. 1, 2007, returned 5.8% in the fourth quarter and 40.2% for the year. Its benchmark, the Morgan Stanley Capital International All Country World Index, returned -1.7% for the quarter but was up 12.2% for the year.
The global 130/30 launched April 1, while the other two 130/30 strategies will follow by year-end, Ms. Whittington said.
The $4 million large-cap growth 130/30 suffered during the fourth quarter, returning -1.4% vs. -0.8% for the Russell 1000 Growth benchmark. For the year ended Dec. 31, the long/short strategy returned 16.7% vs. 11.8% for the benchmark. It was also seeded on Jan. 1.
The $4 million smidcap product was down 2.7% in the fourth quarter, beating the Russell 2500 index, which returned -4.3% in the same time period. The portfolio returned 6.1% for the year vs. 1.4% for the index.
As some hedge fund strategies struggle with performance, 130/30 will begin to look like a more attractive alternative, Ms. Whittington said.
However, investors are more risk averse than they were at the beginning of last year, she said. “We will be a little slower in attracting new assets this year than we would have been at the beginning of last year,” she said.
The 130/30 strategies are also available to investors in a separate account format.
Separately, NACM plans to launch a frontier fund in the third quarter. The fund is an extension of the existing $560 million global select fund, an all-cap global equity strategy, Ms. Whittington said. The new fund, currently registered as a Luxembourg SICAV, will invest some 80% of its assets in developed and emerging markets equities, and the remaining 20% in frontier markets, or pre-emerging markets.
The fund is being developed in partnership with Lawrence Speidell, CIO at Frontier Market Asset Management LLC, La Jolla, Calif., and a former partner at NACM.
The fund initially will be open to Asian and European investors but eventually will be offered to U.S. investors, Mr. Speidell said. “This is designed to provide emerging-markets investors with a more broad-based ... lower volatility, diversified portfolio,” he said.
