Acadian Asset Management launched an emerging markets version of its global managed volatility strategy, which aims to deliver equitylike returns with far less volatility than capitalization-weighted indexes.
In a telephone interview, Churchill Franklin, executive vice president and COO, said a large U.S. corporate defined benefit plan provided an initial $100 million mandate for the strategy. He declined to name the client.
Managed volatility strategies seek to take advantage of what proponents call the mispricing of risk within equities, where historical data show high volatility stocks, contrary to expectations, underperforming their low volatility cousins.
Acadian is seeing “considerable interest” for an emerging markets managed volatility strategy from pension plans that, while convinced emerging markets should continue to outperform developed markets over the long term, are reluctant to become overly exposed to those markets' volatility along the way, Mr. Franklin said.
Acadian's global managed volatility strategies, which now have four-year track records, currently have roughly $1.4 billion in assets under management, according to company data.
The performance of the firm's $1.04 billion Global Managed Volatility strategy offers a glimpse of the advantages this type of strategy can offer clients in terms of smoothing out market swings, as well as the tracking error clients have to live with along the way. For example, in 2008, when the benchmark MSCI World index plunged 40.71%, Acadian's strategy lost only 24.35%, but when the benchmark surged 29.99% in 2009, the strategy rose only 10.13%. On balance, for the first four years since inception, the strategy has worked in investors' favor, with returns outpacing the benchmark by an annualized 2.41 percentage points a year, according to eVestment Alliance.
