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Asset classes

Aviva Investors Index Opportunities Fund

A truly alternative strategy offering equity-like absolute returns, but with significantly lower volatility and near-zero correlations with all major asset classes.

Investment Strategy

Global equity indices rebalance or reweight on a regular basis, with certain stocks added to or removed from indices on specific dates. The surge in trading volume around index rebalancing dates as passive funds adjust their portfolios to match the index they track can overwhelm available liquidity and temporarily force stock prices away from fair value.

This creates an enduring, regular arbitrage opportunity that is unaffected by changing market conditions. The growth in popularity of passive investing has increased the volume of this activity and with it the opportunities.  At the same time, the scaling back of proprietary trading desk and hedge fund activity in the years since the onset of the credit crisis, has increased the opportunity set yet further by reducing the number of market participants using this strategy.

The Fund

The Aviva Investors Index Opportunities Fund arbitrages liquidity and pricing anomalies that occur in those stocks that are being excluded or included in the restructure process by taking long positions in stocks that are being added to global indices and short positions in stocks being deleted from global indices.

The Fund targets absolute returns of 1-month Euribor +5% per annum with a volatility of less than 7.0%. The strategy is market neutral and uncorrelated to other asset classes.*

This strategy offers a truly alternative approach, being uncorrelated to other asset classes, and as such offers attractive diversification benefits. The skills we have brought together in active and passive quantitative techniques, portfolio management and trading, present our clients with a compelling opportunity to exploit a consistent source of low-volatility returns.

* target for internal fund management purposes only and not a guarantee or indication of future returns