Canadians Continue to Take to Liquid Alternatives

Canadians Continue to Take to Liquid AlternativesThe idea of liquid alternatives is certainly not constrained to the U.S. market, and as we wrote last October, the Canadian market for such products has continued to grow steadily. One firm looking to take a leading role in that effort is the 14-year old Aston Hill Financial, a Canadian asset management firm focused on meeting the needs of its domestic clients. But those needs have become increasingly difficult to satisfy using traditional asset classes and traditional investment approaches, which is why Aston Hill has made a push into the liquid alternatives space with the launch of two Canadian-based alternative mutual funds, both launched on March 27.

The Aston Hill U.S. Growth Fund

The Aston Hill U.S. Growth Fund provides Canadian investors with easy access to U.S. equity securities through a domestic mutual fund. The fund is managed by Jeff Burchell, who also manages the Aston Hill Capital Growth Fund.

The new U.S. Growth Fund is similar to the Capital Growth Fund in that both use short-selling strategies. However, the U.S. Growth Fund uses short sales primarily to reduce volatility and maintain a net equity exposure between 80% and 95%, whereas the Capital Growth Fund uses short sales and cash holdings more aggressively and maintains net equity exposure as low as 20%.

The Aston Hill U.S. Growth Fund’s investment decisions are informed by proprietary fundamental research. Mr. Burchell also employs a variety of options strategies to generate income, enhance returns, and provide downside protection. While the fund’s investment strategy is focused on U.S. equities, it may also invest in non-U.S. equities.

The Aston Hill Corporate Bond Fund

The Aston Hill Corporate Bond Fund invests primarily in investment grade Canadian bonds. Secondarily, its investments may include non-Canadian and non-investment grade debt securities, including high-yield bonds, floating rate notes, bank loans, convertible debentures, and mortgage-backed securities. The fund also employs alternative strategies using derivatives, leverage, and short-selling, subject to regulatory constraints.

The Aston Hill Corporate Bond Fund is managed by Barry Morrison, CEO of Aston Hill’s Institutional Partners division. Mr. Morrison has more than three decades of experience managing income-focused portfolios.

A Different Approach

“These two new funds, along with our Liquid Alternative Funds franchise, are intended to be a complement within clients’ portfolios that can help lower the overall volatility,” said Ben Cheng, Aston Hill’s President and co-CIO, in a statement last month. “We believe our approach to using alternative strategies combined with fundamental and quantitative analysis, provides a unique product that addresses the need for lower risk, less-correlated portfolios.”

Aston Hill has also created the Liquid Alternatives Education Centre intended to help Canadian investors better understand liquid alts. The firm has authored a whitepaper titled Liquid Alternatives: Improving Portfolio Risk Management, which is available for download in pdf format.

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