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Fulcrum Risk Premia

Fulcrum Risk Premia

Seeks to deliver attractive risk-adjusted returns by capturing robust and repeatable macro risk premia across a diverse portfolio of strategies and assets.

Fulcrum Risk Premia offers a fully liquid and transparent approach to multi-asset risk premia. It provides exposure to robust and repeatable macro risk premia, researched and developed by a quantitative, academic and collaborative team. We have successfully built and managed risk premia solutions for over 10 years and continue to leverage our macro research expertise to deliver consistent performance throughout the economic cycle.

Benefits of investing in Fulcrum Risk Premia

  • Returns – attractive risk adjusted returns with historically low-to-no correlation to equities, bonds and other alternatives.
  • Diversification – highly diversified portfolio of return streams from across multiple strategies and assets. Focused on macro premia and not equity-based premia which invest in single stocks.
  • Discipline – robust, repeatable, and transparent investment process.
  • Experience – successfully managing liquid risk premia strategies for over a decade for institutional investors.
  • Capacity - our size and infrastructure allow for asset growth and customisation of solutions without compromising performance.
  • Ongoing Research – the markets change over time and so must we; we are always driven to improve.

Risk Premium Components

The Fulcrum Risk Premia Strategy brings together Fulcrum's multi-asset, macro risk premia expertise in trend following, carry, volatility, and value investing across commodities, equity indices, currencies, and fixed income.

Trend

  • Diversified, medium-term, pure trend-following
  • Exploit behavioural biases driven by investor “fear” and “greed”
  • Multi-asset across four asset classes (commodities, fixed income, currencies and equity indices)

Carry

  • Diversified, market-neutral carry
  • Forward-looking measures of expected returns are used to evaluate the attractiveness of assets on a risk-return basis
  • Multi-asset across three asset classes (commodities, fixed income, currencies)

Volatility

  • Diversified, dedicated volatility risk premia
  • Exposure to insurance-like protection through the spread of implied volatility over realised volatility
  • Multi-asset across four asset classes (commodities, fixed income, currencies and equity indices)

Value

  • Macro-driven value strategy offering a key stream of diversification and a clearly identifiable premia
  • Identifying under- and over-valued assets
  • Extracted across G10 Fixed Income and currency markets

Who is the Strategy for?

As asset owners look to reduce their reliance on the traditional return sources of equities and fixed income and increase return diversification; they look to asset managers like ourselves to provide investable solutions built on areas of our expertise.

We have designed the strategy to provide an attractive and diversifying source of returns in a highly liquid, capital efficient, transparent and institutional format, all at a fair price.

Whether this forms a core or satellite holding within an alternative’s portfolio or a diversifier within a traditional portfolio, will very much depend on the user and the lens they view the investment world through. But this is certainly something we are happy to work on with investors and are receptive to creating customised solutions to best meet their objectives.

Portfolio Construction

The strategy is bringing together a highly diversified set of return streams from across Trend, Carry, Volatility and Value strategies which are implemented across many asset markets. Different strategies extract information from the same asset class but how that is traded and how they each interact with each other varies over time.

Our approach to portfolio construction is to increase breadth as much as is reasonably practical by continuing to expand the asset universe while having an asset allocation framework that takes advantage of the natural diversification among the premia, whose strength varies over time. An added benefit of extracting multiple premia in one strategy is the netting of positions and reduction in trading costs.

The overall result is a smoother return path over time, with not one premia or asset class dominating returns and ultimately a framework that should enable the strategy to meet its return objectives in different economic environments.

Insight

The Fab Four: Trend, Carry, Volatility and Value

Why we think combining alternative risk premia is necessary in today’s economic environment, and how to go about it.

Volatility Risk Premium

Looking at why VRP remains a controversial investment for many, despite the lack of dispute among investors and academics that it is a long-term structural feature of markets.

Misconceptions Around The Volatility Risk Premium

In this paper, we analyse the performance of a widely employed, systematic S&P 500 VRP strategy during all quarters of negative equity performance since 1996.

The Team

The team that manages and directs the Fulcrum Risk Premia Strategy have been together for five years. The team is managed by Phil Strother who has been in the business for approaching 20 years. He is joined by a dedicated team of six who have experience from many of the top systematic managers in Europe. The most recent addition to the team was Panos Dafas, who joined Fulcrum after 15 years at Aspect Capital. In addition, the team is supported by macro research and trading expertise across a broader institutional platform.

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