Crédit Agricole?s Alternative Investment Products Group plans to launch a directional fund of hedge funds this year using a global macro and systematic trading strategy. The alternatives manager would also consider launching an equity futures single-strategy fund of funds, which would round out its single-strategy fund offering.
CA-AIPG was spun out of Crédit Agricole in 1992. Its flagship fund of hedge funds product is a global diversified fund of funds. Last year this fund returned 9% to investors, net of fees, with a correlation of less than 0.2 and a target volatility of about 4%. Jean-Claude Kaltenbach, chairman of CA-AIPG, says: ?We wanted to offer investors a broadly diversified product, at a time when alternative investments were not as well known as today, bringing the advantage of a reduction of risk through broad diversification across strategies and a large number of managers.?
Typical strategies represented in the portfolio are fixed-income arbitrage, convertible arbitrage, merger arbitrage, high-yield/distressed, macro-global, directional trading and long/short equity.
In 1999, the firm launched its first single-strategy fund of funds. This was a global arbitrage fund. Frederic Neefs, head of investments London, says: ?It excludes any directional strategies to decrease the correlation with any index.? This fund has a market correlation of zero and a target volatility of less than 2%. Its net performance at the end of 2003 was around 9%. CA-AIPG also launched its global long/short fund in 2000. This fund returned 5%, net of fees, to investors last year.
The firm?s best-performing fund is its newest. In October 2002, the manager launched its distressed and high-yield fund of funds. Its net performance for 2003 was around 17%. ?Credit spreads had picked up and we doubled our exposure to distressed and high-yield strategies and benefited through 2003,? says Neefs.
This year, however, CA-AIPG has had its interest in event-driven strategies reignited. ?We?re positive on event-driven strategies including the restructuring of previously distressed companies. We?re seeing opportunities worldwide,? says Neefs. For example, he says, Asian companies restructuring their balance sheets offered structured arbitrage and high-yield opportunities last year.
Investments by Crédit Agricole entities make up 18% of all assets managed by CA-AIPG. The alternatives business has a total of e4.9 billion of assets under management. This has grown by 800% from the e614 million it had under management at the end of 2000. The firm is also building up its private-equity fund of funds business which currently adds another 5% to the e4.9 billion in fund of hedge fund assets under management.
