Man Group set to cap strategies in Systematic Strategies unit

Man Group is expected to announce soon the capping of at least one of three products in its quantitative investment unit – known as Systematic Strategies – as demand for extreme event protection in volatile markets saw the division’s assets swell to nearly $2bn.

The success of the division, which held $1.9bn in March, is a feather in the cap for its head Sandy Rattray (pictured), who has extensive experience in navigating difficult markets, as he co-invented the Vix Index.

The unit’s best known product, co-managed by Rattray, is the long-only Man TailProtect volatility fund, which should make money for clients as volatility spikes in falling markets.

The unit was formed in January 2011, and was an early attempt by Man to combine the talents of its flagship AHL team, its Man Multi-Manager team and the GLG Partners discretionary manager it had bought in 2010, with research from Man’s academic research venture in Oxford.

The unit runs Man TailProtect; the Man GLG Europe Plus Source ETF, a long-only equities strategy drawing on analysis and evaluation of the most compelling broker ideas; and the long-only Man Commodities Ucits fund.

The TailProtect systematic volatility trading strategy rose 34.3% in the six months to September 2011, as markets plunged, as the enormity of the Eurozone’s sovereign debt crisis unfolded.

“That was just what we needed that year,” said one European investor who used the product in his clients’ portfolios.

The fund made 29.3% in August 2011 alone, more than compensating for most equity market falls, which were double-digit, and posting the best month yet for the three-year old portfolio beating a 23.8% gain in May 2010.

Man’s inhouse modelling suggested it would have made nearly 40% in September and October 2008, and ended that year up 89.5%.

Man’s London office declined to comment on the planned capping.

But Rolf Dreiseidler, who heads up the institutional clients team for Germany at the $59bn diversified alternatives manager, said: “The concepts that we offer at Man’s Systematic Strategies unit have been so successful that we are going to announce the closing of these strategies due to capacity constraints shortly.”

Even if Systematic Strategies closes products to new investors, Dreiseidler said other products, which Man has access to, could also play a protective role in volatile markets.

“Managed futures have a strong track-record of adding value in times of equity market crisis. I also see opportunities for discretionary global macro managers that can position themselves to profit from market disruptions.”

He told a roundtable organised by Opalesque that demand for absolute return products was as high as he had ever seen, “and we now have pension funds and insurance companies investing in our products that only two or three years back would not even have considered our solutions.

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