TORONTO - Primus Capital Advisors, SEI Corp.'s Canadian investment unit, is set to offer three new funds in 1996, all using derivatives, but with returns tied to broad investment indexes.
One fund is an enhanced bond index fund that will combine Canadian bond returns with the alpha return from a global bond portfolio, said Stephen Donihee, president. He said the fund is being offered as competition to traditional Canadian bond managers, which even in the first quartile of performance will often beat their benchmark by only 30 basis points.
Also Primus will offer a straight Standard & Poor's 500 Stock Index fund and a Morgan Stanley Capital International Europe Australasia Far East index fund, he said. Both will use futures contracts to allow funds to invest more than 20% of their assets in non-Canadian securities, a limitation set by Canadian tax rules.
As some large Canadian pension funds already do on their own, the Primus funds will combine long positions in S&P 500 futures contracts collateralized by Canadian Treasury bills, resulting in an S&P 500-like return, but keeping the underlying assets in Canada.
Primus has selected a manger to run all three funds, but because contracts haven't been signed, he declined to name the manager.
Meanwhile, Mr. Donihee said several Canadian pension funds are far into the process of possibly investing in managed futures. Mr. Donihee declined to name the funds. The Primus fund, which is a Canadian version of the BARRA/Mount Lucas Management Index, has gotten a good reception in recent road shows. He said commodities in general may be less intimidating to Canadians, a large natural resource-based economy.
NEW YORK - Coopers & Lybrand L.L.P. created a risk management framework for use by financial institutions designed to set standards for controlling all types of risks, such as market, credit, operational, legal, personnel and reputation risk.
The framework, dubbed generally accepted risk principles, emphasizes the responsibilities of the board of directors and includes ways to manage some of the less quantifiable areas of risk.
Richard Klotz, partner in charge of the financial risk management practice, said that while GARP was written for banks and brokerages, slight fine-tuning would make it useful for pension fund and investment managers.
He said GARP goes beyond the broader recommendations made by groups such as the Group of Thirty, getting to the nuts and bolts of risk management. The framework was put together by Coopers with help from U.S. and U.K. market participants and regulators.
CHICAGO - The Chicago Mercantile Exchange will begin trading a Euroyen futures contract in March, based on an offset agreement with the Singapore International Monetary Exchange. The expanded Euroyen trading will compete with a similar agreement between the London International Financial Futures and Options Exchange and the Tokyo International Financial Futures Exchange.
The CME also will file for approval to trade futures and futures options on the Nasdaq 100 Index, a capitalization-weighted index of the 100 largest stocks trading on the Nasdaq National Market.