Credit Agricole Asset Management (CAAM) has launched a volatility strategy for institutional investors.
"We see volatility now as an asset class that can be used to diversify and enhance portfolios," CAAM product specialist Stephane Mauppin said.
"Given the extreme volatility experienced in the market during the 2008 financial crisis, Australian superannuation funds experienced large falls in their equity and credit portfolios. These directional volatility strategies can help diversify this exposure and therefore smooth future returns," he said.
The strategy does not trade in the VIX, which measures short-term volatility. The main objective of the CAAM volatility strategy is to create value using short and medium cyclical fluctuations in the implied volatility of equities.
The strategy predominantly uses exchange-traded options on three major market indices - the S&P 500, the DJ Eurostoxx 50 and the Nikkei 225.
"This measure is more adaptable to mid- to long-term management than short-term volatility indices such as the VIX," Mauppin said.
As it is a strategy, mandates can be tailored for investors. Investors also have the ability to choose the benchmark, which can be cash or the MSCI.
ING investment management - multi-strategies group has committed $100 million to the strategy.
The fund has received $100 million from ING's Optmix multi-manager business, with $50 million already invested, CAAM head of institutional distribution John Maragiannis said.
The firm has marketed the strategy to 21 institutions and five consultants.
"We have five to six very interested institutions," Maragiannis said.
CAAM has been managing volatility strategies since 1999 but the expertise has only recently been introduced to the Australian market, he said.
Fees are based on global equity long strategies rather than hedge funds.
