Balanced houses dominating high alpha fund sector

High alpha strategies typically focus on either beating their indices by at least two percentage points per annum or by achieving absolute returns.

Schemes have chosen these mandates over the last four years as they have increasingly turned their back on balanced management and moved towards specialist management.

But new research by Hymans Robertson shows that three investment managers which traditionally dominated balanced management – Merrill Lynch Investment Managers, Schroder Investment Management and UBS – have nearly 60% of the market.

Hymans’s survey of 37 managers, which is part of a series that will replace the consultant’s annual Big 50 report, found that MLIM had £5.9bn worth of high alpha mandates, Schroders had £4.8bn and UBS had £3.3bn.

Hymans plans to release details of the survey during the autumn.Other large balanced houses that have fared well in the high alpha arena include Gartmore Investment Management, which is the fifth biggest high alpha manager with £1.19bn. In sixth place was Baillie Gifford with £1.18bn, while Standard Life Investments came 12th with £404m.

Hymans also found that the fees charged by fund managers for high alpha equity products is 10-25 basis points higher than those charged for traditional briefs.

The average fee for a £25m high alpha equity mandate is 0.65% per annum according to Hymans, and that falls to 0.55% for a £100m mandate. Hymans also said that most investment houses were willing to accept performance related fees.

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• United Kingdom
• Hedge Funds