Conning and Ramius Alternative Solutions have entered into a strategic alliance to develop customized alternative investment strategies for insurance companies.
The firms will customize strategies traditionally used by hedge funds to enhance the risk-adjusted returns of insurance portfolios. Hedge funds have traditionally posed a number of problems for insurance companies such as lack of transparency, high capital charges, unattractive liquidity and high fees, said Woody Bradford, president and CEO of Conning, an investment manager for insurance companies.
“These four challenges have limited investments in hedge funds from insurance companies over time,” Mr. Bradford said in a telephone interview.
The strategic alliance will offer the same kind of exposure at a lower cost through liquid products such as exchange-traded funds and total-return swaps.
Client strategies, which will be customized depending on the size and complexity of a client's portfolio, will be overseen by an investment committee comprising senior professionals from both firms. The firms will discuss in the coming weeks how to brand the strategies.
The strategies are more than just hedge fund replication, said Vikas Kapoor, managing director and co-head of Ramius. They will also use managed accounts with some hedge funds to obtain appropriate exposures that are not available elsewhere.
“We will develop custom alternative exposures that are a complement to interest rate and credit risk,” Mr. Bradford said.
