Tideway seeks to leverage Ucits access to more European sales

Tideway Investment Partners, investment adviser to the macro-driven absolute return Tideway Global Navigator fund, is looking to develop further distribution of its Ucits product following successful sales of units into Germany.

James Baxter, partner in the business, said that Switzerland and France were the most likely candidate markets for further exploratory talks with distributors and contacts at organisations such as Credit Suisse.

Such discussions will also focus on how Tideway can develop the passporting of its Ucits into retail markets beyond the UK and Germany, where it already has full passporting rights.

Adjustments to custody are another area being looked into, in order to be able to offer of share classes in multiple currencies – dollar, euro and sterling. Again, Baxter sees this as a way to facilitate access to retail markets across Europe, and possibly into Asia via Hong Kong, where one of Tideway’s key shareholders is based.

Baxter said the business model being pursued by Tideway has another advantage, given its tie-in with Luxembourg based Alceda Fund Management – the asset management subsidiary of Hamburg based Aquila Group.

Alceda is the investment manager of the Ucits. Effectively this means that while Tideway decides where to invest investors’ money, Alceda plays an important part in terms of the structure of the vehicle for regulatory reasons – such as responsibility for daily value at risk calculations – plus it facilitates the marketing in those areas where its brand is better known or where it has connections to distribution that can be leveraged – such as in Germany. By way of example, he said that random sales to previously unknown parties have been bigger in Germany than the UK – £250,000 vs. £60,000 – Baxter said, which suggests something about the value of the Alceda name.

Baxter said that Tideway established its relationship with Alceda after first considering an Irish vehicle structure. However, on comparison Luxembourg was seen to offer certain advantages, including, on balance, slightly better entry into Continental Europe.

Future growth in sales of the Ucits will depend on passing certain size hurdles. Baxter said on the basis of past growth in assets, the fund should pass the £20m level sometime around Christmas this year, heading towards £50m in 2013. At that size it would start to attract a broader set of investors, he said.

Baxter said that Tideway’s allocation preference for the time being in the area of fixed income is to corporate bonds, particularly issued by financial firms.

Baxter said that generally speaking the risk/reward argument was still in favour of fixed income, given the volatility of equity returns in the past few years. This could change over time, but would depend on how the ongoing environment of low interest rates and share price volatility were to change.

The fund has no allocation to peripheral Europe, but is instead focused on the likes of UK and core Europe insurers, as well as US financial companies. There are good ongoing opportunities to get access to strong returns in both the short and medium terms, for example, because bank lending continues to be restrictive, leading companies to seek funding via debt markets. The suggestion is that investors can extract considerably higher coupons then they might get from what are currently perceived as risk-free sovereigns offering negative real yields.


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