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Liquid alternatives investing

What are Liquid Alternative Investments?

Liquid alternative investments are mutual funds or exchange-traded funds (ETFs) that aim to generate a total or absolute return.

Alternatives provide investors with diversification and downside protection through exposure to alternative investment strategies. They offer greater transparency and require lower minimum investment levels than traditional alternative investments while showing improved liquidity. They follow strategies which are usually less constrained than traditional investments and use additional tools like leverage, shorts and derivatives.

A wide range of types of alternatives and ways to combine them with traditional portfolios

Why add Liquid Alternative Investments to your portfolio?

Enhance Diversification

Historical correlations between liquid alternatives and the main traditional markets are low, and even negative for certain styles of alternatives. Within alternatives, the various investment styles also bring a breadth of diversification, with most correlations below 40%.

The alternative universe also provides investment propositions with various levels of risk diversification, as represented by the historical ratio of volatility to the equity volatility.

Enhance Risk-Adjusted Profile

The risk-return profile of alternatives tends to be asymmetric: the strategies can behave differently depending on an up and down market environment. While this is more pronounced in certain types of strategies than others, the addition of a balanced portfolio of alternatives usually brings additional returns without increasing drawdown risks by the same amplitude.

Unique Investments

The portfolio of Funds offered by THEAM Quant presents clients investments they would not find on their own. It provides them with a unique opportunity to take advantage of non-traditional systematic strategies.

Our Solutions

Fixed Income Diversifier

THEAM Quant – Fixed Income Diversifier gives access to different sources of returns in the interest rates curve with risk control mechanisms, in a fully systematic fashion. The objective of the fund is to increase the value of its assets over the medium term, by being exposed to a global dynamic long/short portfolio of short-term money market rates and long term government bonds. The portfolio is built using a systematic selection of diversified sources of return in the interest rates markets while aiming at (i) keeping the objective of keeping the Sub-fund annual volatility at a target level of 4,5% and (ii) reaching market neutrality of the government bonds exposure.

The fund leverages on the most recent research on factor investing in fixed-income.

The BNP Paribas Quantitative Investment Strategies Lab team (QIS lab) has released a new research paper called carry and momentum in government based on the results of their extensive work on factor investing in fixed-income.

Equity World DEFI Market Neutral

For the more directional risk averse profiles who seek stable returns in various market conditions, we created DEFI Market Neutral.

The objective of the fund is to increase the value of its assets over the medium term by being exposed to a leveraged long/short dynamic basket of equities and futures listed on worldwide markets or operating on these markets, the components of which are chosen using a systematic selection method based on a fundamental analysis of companies.

This fund takes a long exposure to the four core equity factors, as well as short positions in regional market indices (S&P 500, EURO STOXX 50 and Nikkei 225). The weights of each exposure are adjusted in order to neutralise the aggregate beta versus the MSCI World Index. For more information, you can browse its dedicated website.

Multi Asset Artificial Intelligence

Building on the 10-year track record behind the Multi Asset Diversified strategy, the latest member of the suite uses an Artificial Intelligence algorithm (neural networks) for allocating dynamically between a number of strategies with trend following and mean-reversion characteristics, across asset classes. 

Its objective is to increase the value of its assets over the medium term, by being exposed to a diversified long/short portfolio across different asset classes (equities, fixed income and commodities), allocation of which is determined using a systematic method based on artificial intelligence. The exposure to the portfolio is adapted in order to keep the fund annual volatility at a target level of 8%.

 

Learn more here.

Equity GURU® Long/Short

THEAM Quant – Equity GURU® Long Short aims to generate long term absolute return independent of the equity market’s trend by being exposed to the largest and most liquid European and US stocks which follows the GURU® strategy’s selection criteria in terms of profitability, valuation and future business prospects. 

Dispersion US

The Dispersion US fund provides the potential of diversification for an equity portfolio during material market drawdowns while offering a potential neutral carry cost over the medium term during rising markets. The Fund strategy is Implemented systematically via a basket of individual stock volatility swaps and an index volatility swap. 

Multi Asset Diversified

The fund  aims to increase the value of its assets over the medium term, by being exposed to a diversified long/short basket, the components of which are chosen using a systematic selection method based on different asset classes (equities, fixed income, commodities and real estate). The exposure to the dynamic basket will however be adapted in order to keep the fund annual volatility at a target level of 10%.

A systematic approach based on two investment principles, which execution has been consistently improved since the Fund launch in 2008:

  1. At the underlying level: Trend Following is used to determine positions and market timing.
  2. At the portfolio level: asset allocation integrates individual asset views while privileging a robust risk diversification.

  

This strategy is also available in Defensive and Protected versions.

Equity US Premium Income

The US Premium Income fund seeks provide income and capital growth by implementing a systematic option strategy on a selection of US equities which aims at generating income in bullish and moderately bearish markets. The fund targets an income of 3% per year above USD short term interest rate, the achievement of this target is not guaranteed.

Volatility World Absolute

The Volatility World Absolute Fund’s main objective is to increase the value of its assets over the medium term, through the use of strategies linked to the market’s volatility. 

It allows investors to benefit from a diversified portfolio of diversified volatility Risk Premia Systematic strategies.

Absolute Alpha

The Absolute Alpha Fund’s main objective is to increase the value of its assets over the medium term, through the use of quantitative investment strategies across different asset classes.

It allows investors to benefit from a diversified portfolio of Risk Premia systematic strategies with a strategy that aims to capture a substantial portion of the alpha of active managers in a liquid and transparent framework. 

Alpha Commodity

The Alpha Commodity fund objective is to generate absolute performance thanks to a synthetic exposure to a portfolio of quantitative strategies. In conclusion, the Fund aims at benefiting from key Commodity market’s specificities.

Key points

  1. Access, on a pure-Alpha basis, to similar Commodity Alpha sources as the ones used by our flagship in-house commodity strategy, BNP Paribas® Oscillator Commodity strategy (live since October 2007). Additional source of Alpha: backwardation.
  2. Non directional, market-neutral portfolio of non directional, market-neutral underlying quantitative strategies. As a result, the contributors are broadly uncorrelated with each other in order to benefit from diversification.
  3. A dynamic and risk-balanced allocation as well.
  4. At last, the funds aims at delivering a level of volatility ranging from 3% to 6%.
Alpha commodities illust

Raw Materials Income

The THEAM Quant Raw Materials Income fund aims to generate a sustained income over the medium term.

Key points

  1. Access to the Commodity Curve Alpha source that was implemented in our flagship in-house commodity strategy, BNP Paribas® Oscillator Commodity strategy (live since October 2007).
  2. Commodity Curve Alpha: created through an optimal investment on the forward curve using the S&P GSCI® Dynamic Roll mono-indices.
  3. Diversified allocation among 9 Commodities within an ex-agriculture and livestock broad commodity universe.

For more details, please check the product page which is accessible through the table at the bottom of this page.

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Related funds

Funds Investment theme Asset Class Style
THEAM Quant - Alpha Commodity Liquid Alternatives Commodities Long Short Multi Premia
THEAM Quant - Raw Materials Income Liquid Alternatives / Income Commodities Income
THEAM Quant - Equity GURU® Long/Short Liquid Alternatives Equities Long Short Equity
THEAM Quant - Dispersion US Liquid Alternatives Equities Volatility Arbitrage
THEAM Quant - Equity US Premium Income Liquid Alternatives / Income Equities Income
THEAM Quant - Equity World DEFI Liquid Alternatives/ Factor Investing Equities Market Neutral
THEAM Quant - Fixed Income Diversifier Liquid Alternatives Fixed Income Income
THEAM Quant - Absolute Alpha Liquid Alternatives Multi-Asset Absolute Return
THEAM Quant - Multi Asset Artificial Intelligence Liquid Alternatives Multi-Asset Managed Futures
THEAM Quant - Multi Asset Diversified Defensive Liquid Alternatives Multi-Asset Managed Futures
THEAM Quant - Multi Asset Diversified Defensive Liquid Alternatives Multi-Asset Managed Futures
THEAM Quant - Volatility World Absolute Liquid Alternatives Multi-Asset Volatility Arbitrage
THEAM Quant - Multi Asset Diversified Protected Liquid Alternatives / Defensive Strategies Multi-Asset Flexible Multi-Asset
THEAM Quant - Multi Asset Diversified Liquid Alternatives / Defensive Strategies Multi-Asset Protected

Investments in the aforementioned fund are subject to market fluctuation and risks inherent in investing in securities. The value of investments and the revenue they generate can increase or decrease and it is possible that investors will not recover their initial investment. Source: BNP Paribas Asset Management Holding, registered with the Paris Registry of Commerce and Companies under number 682 001 904 as a Limited Company with share capital of 23 041 936 euros. Registered office: 1 Boulevard Haussmann, 75009 Paris. Postal address: TSA 47000/75318 PARIS CEDEX 09

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