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130/30 Guide



This type of fund made its debut in the UK in July 2007, having been pioneered in Japan, Australia and the USA. Its popularity in the US, in particular, rose quickly, and by the latter part of 2007 there were some $50bn of funds under management in that country.

Its arrival here was made possible by the adoption of the European UCITS III regulations: all funds were required to sign up either to this, or an alternative approved regulatory scheme, by early 2007. Many took the UCITS III route, which contained a more liberal Product Directive than previous UCITS incarnations. With access to the directive's wider range of permitted asset classes, providers were now able to look at ways of enhancing their formerly long-only product ranges with more innovative offerings. This in turn opened the way to the introduction of 130/30 strategies – an approach that UK fund managers had already been eyeing with interest.

There are obstacles to any rapid development in the number of market entrants, however. The concept relies on strong quant-based capabilities or, increasingly, a fundamental approach that has a rigorous research process at its core. Also essential are back- and mid-office functions that are geared up to a different way of running money, and access to specialised skill sets. The necessary changes in emphasis represent at least a pro tem barrier to entry for smaller providers.
As a result, it is initially the better resourced groups – those whose international arms are already running comparable investment operations, or those who are prepared to buy in the skills they need – which are best placed to bring this product to the market. And, this makes it likely that adequately resourced 130/30 funds can only make their appearance on the scene in a trickle. In our Concept section we can explore the way in which these vehicles work.
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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.

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