How SECOR used communication and co-ordination to overcome time pressures and launch a new hedged equity fund
Andrew Bang, Client Services, at SECOR examines the challenges the firm faced launching a new product on an abbreviated timeline in a pandemic and how these difficulties were overcome.
Sara Benwell POSTED ON 6/17/2021 3:07:57 PM
Sara Benwell: What made you decide to launch this fund now? What market trends were you responding to?
Andrew Bang: The current market environment coupled with client demand for a hedged equity solution drove our decision to launch the fund.
Institutional investors require equity exposure to achieve reasonable long-term returns; but long-term equity return expectations continue to fall as equity valuations get more worrisome.
“Institutional investors require equity exposure to achieve reasonable long-term returns”
Today, over-stimulative government policies, geo-politics, eventual unwind of speculative bubbles, and inflation surprises are the biggest market risks and our hedged equity fund can potentially provide a solution for investors.
The fund is launched with approximately £110 million assets under management (AUM) of investments from UK-based pension schemes and we believe European institutional investors are seeking our type of strategy.
Sara Benwell: What makes it different from other similar products and how does it fit into your overall strategy?
Andrew: Our hedged equity philosophy below guides our investment process. We believe this mindset is differentiated in our SECOR Hedged Equity Fund:
- Combining long equity exposure with a defensive strategy may generate superior risk-adjusted returns
- Equity market drawdowns are hard to time, so opportunities for hedging need to be continuously re-evaluated
- We do not try to predict an exact market draw-down scenario, instead we construct a portfolio that is expected to behave well during equity market drawdowns, regardless of the cause
- Diversified portfolio of hedges is preferable to large macro bets
SECOR has been managing risk mitigation strategies for institutional clients since 2012 and we believe the SECOR Hedged Equity Fund is a natural evolution in our offerings.
Sara: What were some of the key operational challenges along the way?
Andre: The investors’ market exposure and their need for a hedged equity fund necessitated an abbreviated launch timeline that left no room for errors; an on-time launch without any delays was the crucial challenge for the launch.
Having a robust operational infrastructure has always been important at SECOR and since inception, we have had strong foundations in trading, operations and IT.
“The Covid-19 pandemic with its remote working environment and its particular limitations brought a whole new set of complications and coordination challenges”
Even during normal times with a robust infrastructure, working globally across several time zones to establish an UCITS fund and its multiple operations functions to include fund administration, custody/depositary, transfer agency, accounting, risk management, reporting and client relationship is no small task.
And the most critical piece of the launch was receiving regulatory approval from the Central Bank of Ireland (CBI) without the potential delays it may have caused.
The Covid-19 pandemic with its remote working environment and its particular limitations we’ve all been enduring brought a whole new set of complications and coordination challenges.
Sara: How did you overcome the challenges?
With client assets awaiting in the wings for the launch of our few Fund, fastidious coordination, planning and on-time execution between internal teams, and various external service providers were the keys to this launch.
Several concurrent streams of launch processes and workflows were devised and implemented by the project team to ensure all deliverable occurred on time and in proper sequence.
“The seemingly overwhelming challenge of launching on an abbreviated timeline during the pandemic required extra communication”
Critical paths to launch were prioritised and potential risks for delay also mitigated. To minimize regulatory delays and multiple comments from the Central Bank, extra emphasis was placed on robust drafting of the prospectus supplement prior to submission to anticipate potential regulatory comments and to minimise any back and forth.
We supplemented our internal efforts by teaming with Davy Fund Services, a leading UCITS ManCo provider, and other reliable service providers (Walkers on legal and Northern Trust for administration & custody) with whom we’ve had established working relationships.
The seemingly overwhelming challenge of launching on an abbreviated timeline during the pandemic required extra communication and coordination by the project team and good old fashioned “all hands-on deck” teamwork by the entire project team members and service providers.
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