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Liquid alternatives – diversification has many dimensions
Investors seeking returns have to take greater and greater risks. Generating positive returns thus becomes a real challenge, especially for institutional investors, who in many cases are subject to extensive regulatory allocation restrictions and have only a small risk budget at their disposal.
The classic mix of equities, fixed income, real estate and commodities is often no longer sufficient. Liquid alternatives and their potential returns, therefore, play an increasingly important role in asset management. In order to take advantage of the opportunities they provide, we offer our investors two different absolute return approaches:
Metzler Long/Short Volatility
An innovative option strategy with an active approach
Liquid alternatives can help generate profits in market phases where purely traditional allocations lead to losses.
Metzler Long/Short Volatility
As an innovative option strategy, this institutional mutual fund benefits from rising and falling equity markets. In an environment of higher correlation between equities and bonds, this fund aims to achieve a target return of four percent* above the money market rate. Metzler follows an active, discretionary investment approach supported by technical models that analyze current market conditions and the volatility environment.
The investment approach is characterized by active management and high flexibility. Due to the underlying long positions, portfolio managers are not forced to reduce risks when market movements are extreme but can utilize risks as opportunities. We aim to trade options at the precise time when others are forced to trade.
Balanced & stable
The aim of the strategy is to ensure a permanent balance between opportunities and costs from long positions on the one hand and income and risks from short positions on the other hand, thereby generating a stable risk/return profile.
Dynamic & active
Long positions in longer maturity options form the basis of the strategy. Premium expenditures for the purchase are minimized using an active trading approach. In addition, shorter maturity options can be sold tactically to generate additional income in the form of premium income.
Rule-based & flexible
Our investment approach is discretionary and rule-based, but not rule-bound. This provides the necessary flexibility to exploit intraday opportunities. The investment universe of the Metzler Long/Short Volatility fund includes mainly options on liquid equity indices with a focus on the S&P 500.
*Achievement of a target return cannot be guaranteed or ensured.
Metzler Alternative Multi Strategy
Persistently low interest rates are forcing many professional investors to invest in much more complex investment vehicles and to diversify considerably. Full diversification potential can best be exploited by broadening the investment horizon because in addition to classic risk premiums like equity or interest rate risk, there are other alternative risk premiums.
Investments with an attractive risk/reward profile are always difficult to find. Alternative risk premiums are an interesting admixture because they are independent of each other and also show a low correlation to other asset classes and bonds. A classic mixed portfolio can therefore benefit greatly from adding alternative beta.
Risk premiums as a source of incomes
In order to generate stable returns, Metzler uses an absolute return approach to diversify broadly in a variety of risk premiums. This enables us to generate a market-neutral, reproducible returns.
Our absolute return strategies, combine different uncorrelated alternative risk premiums that can be utilized by institutional clients without restriction.
Effectively exploiting market inefficiencies
One good way to protect your portfolio, even in times of crisis, is to invest in market inefficiencies. They provide a counterpole to risk premiums.
The most prominent example of a market inefficiency is probably the momentum anomaly that can be exploited using trend-following strategies. The basic premise here is that new information can only be reflected in market prices with a delay, and can then lead to exaggerations as well – in both rising and falling markets.
Market inefficiencies thus rely on imperfect markets and irrational investor behavior, which is especially strong in times of crisis.
Strategic diversification
Alternative investments offer diversification at an attractive price, especially in the case of market inefficiencies.
Traditional investment accounts are hit particularly hard when interest rates rise and equity markets experience a correction. Diversifying with a mix of alternative investments inevitably reduces the weighting of critical allocations, making the portfolio less prone to price corrections.
Portfolio Management
Comprehensive know-how ...
Our portfolio management team for absolute return and capital preservation consists of more than 20 specialists from various fields with many years of experience. Through close contact with scientists, the department's know-how is always up-to-date.
... and efficient processes
In addition, Metzler's IT specialists work closely with the team, ensuring a stable system landscape and efficient processes. However, our clients benefit not only from close, interdisciplinary cooperation and the constant transfer of expert know-how, but also from short decision-making processes.
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