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Build a Low Correlation Portfolio

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Natixis Global Associates (NGA), the distribution arm of Natixis Global Asset Management and AlphaSimplex Group (ASG), an investment strategy firm has launched a multi-strategy, absolute-return fund: Natixis ASG Diversifying Strategies Fund (DSFAX).

The fund is thought “to be the first mutual fund to actively manage low-to-negative correlation with major equity indexes by selling S&P 500 futures,” when the need arises, according to an August 3 announcement. “Longer-term correlation of the fund with the S&P 500 is expected to be minimal or negative.”

“The largest source of risk in many investors’ portfolios is equity market risk,” said Andrew Lo, (see exclusive Wealth Manager interview) AlphaSimplex’s Chief Investment Strategist, founder and a portfolio manager for the fund. A professor of finance at the MIT Sloan School of Management, Dr. Lo is known for his work in risk management techniques for absolute-return strategies and behavioral finance. “We designed this fund to answer a broad-based need for portfolio diversification with low to negative long-run correlation to the major equity markets within a liquid and transparent mutual fund vehicle.”

“Using highly liquid futures and currency forward contracts to gain desired exposures, AlphaSimplex seeks to deliver absolute returns through a diversified, actively managed global portfolio of long and short positions,” according to the announcement. The minimum investment is $2,500 for A and C shares, $100,000 for Y shares.

John Hailer, president and CEO of Natixis Global Asset Management, noted in the announcement that, “By addressing the current needs of average investors, including diversification away from the equity markets, reduced volatility and a goal of downside protection, Andrew Lo and the AlphaSimplex team continue to focus on making alternative approaches more accessible and affordable to individual investors.

Michael K. Stanley can be reached at [email protected]

Putnam Funds proposes comprehensive changes to performance and management fees, and fund family breakpoints, pending shareholder approval later this year.

Putnam Investments announced that management fees on the company’s retail mutual funds will be reduced or eliminated in order to provide investors with pricing benefits as well as to keep Putnam’s products relevant in the changing marketplace. “Every element of our re-pricing plan is crafted to benefit our shareholders, in some cases immediately, in all cases over the long haul,” said Putnam’s CEO, Robert L. Reynolds, in a July 28 company statement.

Some of the management fee reductions started August 1st, including fee-reductions on asset allocation funds as well as fixed-income funds, as well as an elimination of management fees on target date funds.

Management fees for Putnam Fixed Income Funds will be reduced by 13% to 34%. Management fees for Putnam Asset Allocation Funds will be reduced by 10%, while the wrap fee for Putnam Retirement Ready Funds will be eliminated.

Putnam will begin performance-based fees for U.S. growth funds, international funds, and the Putnam Global Equity Fund. The fees that managers receive on these funds will be incumbent upon the funds’ performance; mangers will defer the fee if the fund underperforms and raise the fee if it outperforms.

Another change on the horizon is break point discounts for investors. These break points will now be based on the overall growth of all Putnam mutual fund assets as opposed to growth of individual Putnam fund’s assets.

Michael K. Stanley can be reached at [email protected].


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