Anthilia Capital goes for ‘safe’ equities

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In times of low interest rates, Italy’s independent asset management company Anthilia Capital Partners has decided to add an equity product to its fund range, as well as another colour.

Anthilia Orange, a Ucits IV compliant sub-fund of the Luxemburg Sicav Planetarium, joins the Anthilia fund range already including Anthilia Blue; Anthilia Red; Anthilia Grey; Anthilia Yellow; Anthilia White and Anthilia BIT.

Having been back-tested since 2000, the fund is now targeting both institutional and retail investors.

Daniele Colantonio (pictured), head of Business Development, explains that “Anthilia Orange is a global equity fund investing in high quality stocks from developed markets. The assumption on which the product is based is very simple: interest rates are close to zero and investors are looking for returns that go above inflation.”

According to Colantonio, investors seeking returns currently face two options: either they give up on liquidity or they go for equities that offer a reduced risk margin.

The Orange fund is built around the three major pillars of quality, minimum variance and use of call options.

The search for quality stocks is based on a screening mechanism that tries to hunt out highly liquid securities; consistency in dividend growth over time; no excessive leverage; contained pay-out ratio and a high dividend yield.

“Stocks that capitalise less than €1bn are taken off of the list. Firms that have been giving out dividends over the past five years with the last one being higher than the five-year average are in. We heavily rely on consolidated balance sheet numbers rather than analysts’ estimates,” Colantonio explains.

According to Anthilia’s business development manager, at this stage of the screening Anthilia Orange has already taken the total number of stocks down to 340 from 28,000. A further screening is then applied according to the dividend yield that takes the number of stocks down to 100.

Once the 100 top list has been put together, Anthilia’s fund managers give the stocks to the machine that calculates their minimum variance level to favour the stocks that are less volatile and less correlated to others. At the end of this process, the final 30-40 stocks that will build the portfolio emerge.

“We try to combine the concept of minimum variance with the criteria for portfolio building, looking not only at the behaviour of stocks per se but at their behaviour against their peers,” Colantonio explains.

Finally, the fund offers investors the opportunity to sell call options in case the single stock has a implied volatility above 16%, with the aim of gaining roughly 0.7% each month.

“So far we have had an average annual return between 4% and 8% from the sale of call options. This way, in case the market moves laterally, the investors will be at least be sure to earn the amount of the call option sale. We have imagined three different market scenarios: if the market is down 40% we defend significantly; if equity goes +40% we aim at offering some 20-25% performance, and in case it moves laterally our investors get the amount of the call option sale,” Colantonio says.

All in all, then, Anthilia Orange is an equity fund that aims at make investors participate in the upside of the market, while protecting them in downside phases.

Officially open for investments from 3 November 2014, the fund starts with a size of €20-25m and aims at achieving a size of €100m in 2015. As per its client basis, Colantonio says: “Two categories are perfect for this fund: the good-saver, retail type of investor and institutional investors such as family offices, asset allocators or pension funds.”

 

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