Sub-fund Aims to Offer Bond Diversification in a Capital-Efficient Structure
Bank of America Merrill Lynch (BofAML) and Koris International (Koris) today announced the launch of the Merrill Lynch Investment Solutions (MLIS) - Merrill Lynch Dynamic Capital Protection UCITS Fund (the sub-fund), managed by Merrill Lynch International (MLI). This latest sub-fund on the MLIS UCITS platform, provides institutional investors with a capital-protected solution that uses core-satellite investment principles within a risk control framework to generate risk premium.
The sub-fund extends the range of UCITS products offered on the MLIS platform with a solution tailored to institutional investors looking for a bond portfolio diversifier in a capital-efficient structure. It also comes ahead of the implementation of the Solvency II Directive, which will see an increase in the requirements for capital held against risk assets.
MLI, in its capacity as investment manager of the sub-fund, has appointed Koris as investment advisor. As an acknowledged specialist in systematic risk-budgeting and dynamic asset allocation strategies, Koris has offered proprietary technologies engineered by its research and development team for over 10 years. Koris provides its clients with advisory services delivered by renowned experts from the asset management industry and the academic world.
The combination of a low interest rate environment and an aging population is putting increasing pressure on asset and liability managers, particularly insurance companies, to deliver pre-defined rates of return within the parameters of rising prudential obligations. By using an efficient risk transfer method in the sub-fund, MLIS and Koris aim to tactically allocate into risk assets such as equities, while limiting the amount of the Solvency II Capital Requirement that would otherwise be needed.
“We are delighted to have developed this partnership with Koris,” said Philippe Lopategui, BofAML managing director and head of the Alternative Funds Platform and Global Financing Solutions. “They have proven over many years to be able to deliver consistent, robust and relevant investment solutions to institutional investors with a grounding in highly innovative academic research on portfolio construction and risk management. We believe this dynamic allocation strategy will prove compelling to a wide range of our investor base.”
Jean-René Giraud, chief executive officer, Koris added: “This partnership confirms the industry’s interest in dynamic allocation and risk-budgeting solutions and underlines the relevance of the strategies Koris has developed for its clients. In addition, teaming up with BofAML provides us with access to their unrivalled distribution capabilities across Europe, and allows for a partnership with a group who truly understand the shifting demands of institutional investors in this space.”