Tuesday, 29 July 2014
Last updated 15 hours ago
Oct 16 2009 | 8:50am ET
By Oliver Prock -- The already written off hedge fund sector has reinvented itself after last year’s crisis. Everybody is talking about “UCITS hedge funds” as a new and innovative concept for meeting clients’ increasing demands of consistent returns, market independence and capital protection. But this concept is not knew, it goes back to 2002 when the first hedge fund—launched by Salus Alpha—was implemented under UCITS I. Though the UCITS directive was established in 1986, it took 16 years for asset managers to take notice of the opportunities the directive provided.
From the beginning, it was clear to me and my collegus at Salus Alpha that transparency, liquidity and risk management were the most important factors to secure our success in inventing the first UCITS hedge fund. For sophisticated UCITS III structures, risk measures must be calculated on a daily basis, and the best way to accomplish this is the use of a Value-at-Risk (VaR) model to quantify maximum loss. The UCITS directive requires the use of either Relative VaR or Absolute VaR and imposes limits on both of these measures, therefore it was hard work to be able to offer all hedge fund Strategies seven years later.
Now, after the financial crisis has wreaked havoc on the market, everyone wants to be part of the UCITS hedge fund world.
We strongly believe in investing in alpha, therefore it is a mystery to us why the majority of the market invests in beta. It is becoming clearer that the interval between crises will get shorter since the global markets are more volatile than the markets of just one country. Therefore, investing in products independent from this market volatility will become more important as markets become more connected.
Our innovative investment approach for hedge funds including transparency, liquidity, consistent returns, capital protection and alpha/beta separation is exactly the same way a client would invest. We recognized the potential of UCITS hedge funds in 2002, and despite the complicated regulations, we were able to offer the first regulated hedge funds under UCITS I in 2003.
It is obvious that the attempt by traditional fund manager to run hedge funds did not work out, since traditional fund manager were not able to successfully implement the concept of short selling in there investment strategies. Also, the concept of hedge fund-like mutual funds will not work out, because to successfully merge the traditional fund world with the hedge fund world all factors, including investment process, business model, management approach or manager selection, have to be harmonized across liquidity.
We didn’t start in one of the two corners, i.e. hedge frunds or traditional funds, but right in the middle where UCITS hedge funds are possitioned. It is becasuse of this that we were able to cover all the above mentioned factors holistically from the beginning. Salus Alpha was the first manager to merge the traditional fund world with the hedge fund world.
Oliver Prock is CEO and CIO of Salus Alpha Capital GmbH. He has over 15 years of professional investment experience working for banks and investment companies in Austria and abroad. He introduced the first world-wide UCITS III compliant alternative investment fund. Also, the successful development of the Alternative Investment Indices listed on the Viennese Stock Exchange was realized under his management. Further, Mr. Prock is founding member and chairman of the board of the Vereinigung Alternativer Investments, which is the first independent agency for protecting and representing interests of the providers of alternative investment products on the Austrian capital market.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…