Systematic Alternative Risk Premia
Parametric has teamed up with California-based Research Affiliates to launch a new institutional investment strategy, called Systematic Alternative Risk Premia, or SARP.
The strategy is designed to produce better returns and lower volatility than traditional alternative investment approaches through three key investing factors - Value, Momentum and Carry. The strategy is also known as Systematic Global Macro and covers equities, bonds, currency and commodities markets.
SARP is an alternative to hedge funds, designed by Research Affiliates and Parametric to deliver attractive absolute returns (expected to outperform short–term cash by 7-9%, with moderate volatility of 10-12% on average) at a reasonable cost, in a liquid and transparent way.
Who is it designed for?
Australian institutional investors seeking alternative sources of returns which aren't correlated to what is often their main source of investment risk – equities. It is also designed to give those investors an alternative to opaque, illiquid and expensive hedge funds that they may have looked to in the past.
“We know that super funds need to find alternative sources of returns which aren’t correlated to their main source of investment risk – equities. But funds also have tighter liquidity budgets than they used to and fee pressures. These things, combined with a growing aversion to strategies that aren’t transparent, make it the right time for us to launch SARP, which is a liquid, transparent alternatives solution that provides attractive, diversifying returns in a cost-effective manner," Parametric’s Australasian CEO, Chris Briant, said.
"In a low return environment, every basis point is going to count": Q&A with Parametric's Chris Briant
As super funds use up their tax losses from the GFC, tax expense is starting to re-emerge as a big cost. In this kind of high-cost, low-return environment, funds are looking for new ways to maximise returns, without taking on increased risk. To meet this demand Parametric Australia has recently teamed up with California-based Research Affiliates to launch a new alternative institutional investment strategy to Australian investors. The strategy is called Systematic Alternative Risk Premia, or SARP and we spoke to Parametric Australasia CEO Chris Briant to get more detail on the unique approach and find out how successful it has been in other markets. Chris also shared with us a message for all fund members.