36 South Capital Advisors has launched the Kohinoor Pacific Fund. With an Australian institution as the cornerstone investor this will combine 36 South’s flagship Kohinoor strategy with a new dedicated Australasian portfolio designed to:
- Help limit portfolios’ downside risk
- Provide tailored convexity to help dampen portfolio volatility for Australasian investors;
- Hedge global and idiosyncratic tail risks in Australia;
- Enhance portfolio liquidity in risk aversion scenarios;
- Leverage on the experience and expertise of 36 South’s 12 year track record investing in volatility.
In the current challenging low yield markets, many Australasian investors have to maintain high exposure to domestic and international equities to meet their return objectives.
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Against that, the need for capital preservation and limiting downside risk has never been greater.
Investors look to long volatility as a new source of risk premia that could help them further diversify away from equity risk. 36 South launches Kohinoor Pacific at a time where volatility across asset classes is relatively cheap which provides the opportunity to capture significant convexity.
Jerry Haworth, co-founder and CIO of 36 South, said: "We are very excited about the launch of Kohinoor Pacific as we continue to believe long volatility funds have an immense role to play in a traditional portfolio. There are precious few true diversifiers and even fewer which display convexity whilst over time producing a positive return on investment. It is entirely conceivable that both bond prices and equity prices will move down together in the next serious downturn thus removing the bulwark portfolio hedge that the low traditional correlation between bonds and equities has provided. Portfolio losses in this scenario will be exacerbated and the need for diversifiers will be greater than before."
Richard Hollington, co-founder and head of Trading and Execution, Barclays, said: "This fund offering has been made in response to client needs for a simple and understandable strategy where left tail outcomes have been focused more closely to the geographical exposures of their domicile. This will provide a greater degree of certainty that the Fund will perform should there be a risk-aversion event specific to the Australian region. Added value will be made in the use of judicious proxies to create the highest payoff multiples available."
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