New fund: finccam EQ Tail Protect

finccam has launched a new fund, finccam EQ Tail Protect, as of 30 April 2024. The finccam EQ Tail Protect, a fund in UCITS format, provides simple and innovative access to finccam's risk management expertise. For institutional investors, risk management can be implemented directly via derivatives on an individual basis within the framework of special fund structures for very large portfolios. The finccam EQ Tail Protect fund can be added to an existing equity investment in order to achieve an efficient and disproportionately effective hedge against extreme risks on the equity market in combination with an attractive sustainable basic equity investment.

The implementation of the strategy delivers high capital efficiency and the investor can directly control the level of possible opportunity costs in calm market phases and the strength of the hedge in the event of a crash in the portfolio thanks to the target cost approach at fund level. The fund with Universal Investment as the fund management company (link to the fund) provides a sustainability orientation in accordance with Article 8 SFDR in compliance with the association concept.

finccam EQ Tail Protect invests both in a sustainable global equity exposure as an underlying investment and in hedging instruments. The medium-term target costs of the hedging instruments of 3% p.a. are invested in a portfolio of efficient financial instruments - in particular out-of-the-money put options and VIX calls. This portfolio is adjusted dynamically and there is less ‘negative carry’ due to the optimised selection and adjustment of hedging instruments. The investor thus invests in total sustainable equity exposure and at the same time a systematic strategy that works with target costs and can benefit greatly from crashes. The approach provides a maximum diversification effect in the event of an equity crash, as the instruments used can achieve a strong negative correlation to the equity market.

The fund can be used in all professional customer segments and especially for smaller portfolio sizes. As a portfolio component, finccam EQ Tail Protect delivers an attractive expected return in the event of sharp and rapid falls in the equity market. In a positive market environment, the expected return is based on the equity market minus the target costs. The UCITS solution can now also be used in traditional asset management portfolios.

An exemplary mixture in an allocation comprises, for example, a share of one third of the equity portfolio in order to achieve an effect for 100 per cent of the equity exposure in the event of a crash. With this mixture, hedging would cost around one per cent per year of the total equity exposure - if no crash occurs. This results from the expected target costs of hedging in the finccam EQ Tail Protect fund of around three per cent per year and an allocation of one third of the portfolio.

If you have any questions about the finccam EQ Tail Protect fund, please feel free to contact Adam Volbracht (adam.volbracht@finccam.com) or the entire finccam team!