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Institutional push for 130/30 returns

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EUROPE - Institutional managers and investors are jumping further into 130/30 strategies to gain higher investment returns, according to Dutch Blue Sky Group, the manager of the KLM pension fund assets.

Only in March, the £1bn (€1.5bn) Asda group pension fund chose to allocate £165m of its global equity portfolio via State Street Global Advisors for its first foray into the a 130/30 strategy.

The firm has subsequently announced it has raised $6bn worldwide through the strategy and other institutional managers have opted for 130/30, including Barclays Global Investors and Mellon Capital Management.

Blue Sky, which has €12bn in assets under management, says it intends to shift its entire €4.2bn passive global equity portfolio into 120/20 or 130/30 strategies.

The group said earlier this month it will award new mandates and expand its client portfolio.

Fiduciary manager Blue Sky argues 130/30 strategies result in higher investment returns for pension funds.

"It is a midway between long-only and market neutral strategies," says Ramon Tol, fund manager equities at Blue Sky Group.

"Pension fund boards that are critical towards hedge funds and market neutral strategies are perhaps more open for this kind of approach, because the beta remains 1, while the manager still has possibilities to go short," he told IPE.

"On the basis of his stock ranking, it is easier for the manager to implement his bets: shares which are represented with a small weight in the benchmark can now also be more underweighted by going short," he added.

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