Neuberger Berman is drawing attention to the broadening of its suite of alternative investment solutions with the launch of two UCITS funds employing what it describes as innovative collateralised index put writing strategies.
The independent investment manager says its US Equity Index PutWrite and Global Equity Index PutWrite funds seek to generate attractive risk-adjusted returns through the harvesting of premiums from selling put options on US and Global equity indices.
This will be combined with the conservative investment of underlying collateral. Volatility of this strategy is generally lower than the underlying equity indices as investors typically experience lower up market and down market capture than the underliers, it says.
The funds are
- Sub-funds of the Irish-domiciled UCITS fund umbrella, Neuberger Berman Investment Funds
- Registered for sale in the UK
- Registered for sale across Europe
Downside protection can be expensive
Doug Kramer, co-head of Quantitative & Multi-Asset Class Investments at Neuberger Berman (pictured above), says: “Many investors know that buying downside protection with put options can be quite expensive in the long run.
“Reducing tail risk, dampening volatility and minimising capital erosion comes with a price. Even though put options are expensive in the long-run, there will always be demand for them in the short-run, as many investors simply cannot stomach short-term volatility.
“We can take a long-term view and take advantage of this. In the liquid and deep exchange-traded put option markets, it pays to be a long-term seller. Collateralized put writing is another way of getting exposure to the equity market, but with less downside and lower volatility.”
The index put writing strategies are
- The index put writing strategies are
- Fully backed by cash
- Employ no leverage
These are particularly important characteristics for clients who are looking to preserve capital and meet liabilities or investment goals over the long term, says Kramer. The Neuberger Berman US Equity Index PutWrite Fund was launched on 30 December last year.
The Global Equity Index PutWrite Fund went live on 3 May. The funds are managed by Neuberger Berman’s Options Group investment team. Part of the firm’s Quantitative and Multi-Asset Class team, it has been running collateralised put writing strategies since 2011.
Derek Devens, managing firector, is the fund’s senior portfolio manager. He is supported by research analysts Rory Ewing and Eric Zhou.