Matthew Merritt, Head of the Multi-Asset Strategy Team at Insight Investment (“Insight”), was recently in Malta to speak about a new investment solution namely the Vilhena Broad Opportunities Fund (“VBOF”) which is managed by Valletta Fund Management Limited (“VFM”).

The VBOF which is structured as a UCITS master-feeder, provides investors with access to a dynamic portfolio of a broad range of asset classes and strategies with the aim of capturing what is perceived to be the best investment idea from the broadest possible opportunity set, through its investment in the Insight Broad Opportunities Fund.  The Insight Broad Opportunities Fund has the ability to invest across a wide range of asset classes including equity, fixed income, total return strategies, commodities, real assets and derivatives and seeks to deliver attractive and positive long-term returns.

Matthew explained that the current investment environment presents a period of structural adjustment reflected in deleveraging, sovereign debt crises and global growth which are increasingly dependent on the emerging world.  Consequently, the investment implications present three main economic implications: (a) a rich environment for total return strategies; (b) the certainty of return carries a premium and (c) this is no longer a buy-and-hold world for cyclical assets.  As against the traditional diversified approach, the underlying principles of the Insight Broad Opportunities Fund embrace a strategy that uses a wide investment universe and acknowledges that directional exposure cannot always be the prime driver of returns.  In actual fact, this strategy relies on three core principles namely diversification, dynamic asset allocation and downside protection.

Diversification: Diverse drivers of return have been chosen with exposures that vary according to different economic environments.  These range from:

• Different equities – UK, US, European, Japanese and Asian as well as emerging market equities;

• Fixed income - government bonds, investment grade bonds, high yield bonds and emerging market bonds;

• Total return strategies - relative value trades, dividends, absolute return funds, range-bound strategies and break-out strategies;

• Real assets - real estate, infrastructure and commodities;

• Cash.

Diversification can reduce the downside risk of the portfolio, and it can also improve the prospects for generating attractive performance.  By expanding the investment universe beyond simple asset classes and strategies, it is possible to widen the range of potential sources of return and benefit from exposure to both directional and non-directional risk.

Dynamic Asset Allocation:  The Insight Broad Opportunities Fund accesses a wide range of assets through a broad investment set to include:

• Direct implementation, that aids precision and reduces cost;

• Market directional exposure,  accessed efficiently;

• Active funds, used only when clear outperformance opportunities exist;

• A focused use of external vehicles, driven by Insight’s asset allocation bias;

• Derivative (exchange traded) strategies, used to diversify the Fund’s return profile.

Risk Management – focus on downside protection: Asset class risk is managed by a dynamic strategy with an emphasis on downside risk control. 

Matthew concluded that the Insight Broad Opportunities Fund’s asset allocation process enables the Fund to participate in rallies when markets are performing.  However, in range – bound markets asset allocation has limited scope to add value and consequently total return strategies together with portfolio alpha diversify the investment process through non-directional and non-linear trades.  Finally, the diversified investment process also enables the Fund to preserve capital in bear markets.

The VBOF is the first Fund of its kind in Malta to be structured as a UCITS Master-Feeder Fund.  The structure enables VFM to invest a minimum of 85% of its Net Asset Value in the Master Fund which is the Insight Broad Opportunities Fund, a sub-fund of Absolute Insight Funds p.l.c., which also qualifies as a UCITS.

Insight is an autonomous asset manager owned by BNY Mellon. It is currently responsible for €302 billion* of assets with a reputation for excellence in:

• multi-asset and absolute return

• active fixed income

• currency risk management, and

• liability risk management

*Data as at 31 March 2013. Insight’s assets under management are represented by the value of cash securities and other economic exposure managed for clients.

The opinions expressed herein should not be interpreted as investment advice.

The Master Fund is a sub-fund of Absolute Insight Funds p.l.c., a self-managed scheme, an open-ended investment company with variable capital with segregated liability between sub-funds incorporated under the laws of Ireland with registration number 431087. The Fund shall invest in the Class B1 Euro shares Class of the Master Fund.

The value of the investment may fall as well as rise and any initial charges may lower the amount invested and the amount received upon redemptions. Investments should be based on the full details of the Prospectus and the Key Investor Information Document, which may be obtained from VFM, Bank of Valletta plc Branches/Investment Centres and other Licensed Financial Intermediaries. VFM is licensed by the MFSA. The Vilhena Funds SICAV plc is licensed by the MFSA and qualifies as a UCITS. Issued by VFM, TG Complex, Suite 2, Level 3,

Triq il-Birrerija, L-Imriehel,

Birkirkara BKR 3000 Malta.

Tel: (356) 2122 7311,

Fax: (356) 2275 5661,

Email: [email protected], Website: www.vfm.com.mt.

Matthew joined Insight as Head of Strategy in 2004.  In this role he leads a team focusing on determining overall strategic and tactical asset allocation policy for Insight and ensuring effective implementation across a wide range of portfolios managed within the business.  He joined from Citigroup, where he was head of global equity strategy for Smith Barney.  Prior to joining Citigroup in 2000, he was managing director, chief investment strategist at ING Barings which he joined in 1996.  This followed four years at Natwest Securities as a global investment strategist.  He started his career at the Bank of England in 1989.  Matthew holds an M.Soc.Sc from the University of Birmingham in Money, Banking and Finance and a BA honors degree in Economics from Nottingham (Trent) University.