John Hancock Investments has launched two mutual funds targeting lower-volatility equity strategies designed to provide attractive risk-adjusted returns.
John Hancock Seaport Fund employs a long/short, multi-sleeve equity strategy similar to a hedge fund-of-funds to pursue a more favourable risk/return profile than global equities.
John Hancock Enduring Equity Fund invests in companies around the world with long-lived physical assets and competitive advantages that may result in low levels of earnings volatility and offer the potential for dividend income and inflation protection.
"We see a clear need among investors and financial advisors for strategies that have the ability to participate in the market's upward trend but with less volatility along the way," says Andrew G Arnott, president and CEO of John Hancock Investments. "Both new funds offer the potential for attractive risk-adjusted returns while seeking to minimize risk."
John Hancock Investments selected portfolio teams at Wellington Management Company to manage both funds.
"The new funds are managed by the same Wellington Management portfolio managers who run alternative investments on behalf of institutional clients," says Leo M Zerilli, head of investments for John Hancock Investments. "We believe the portfolio managers we have selected are among the best in the industry for what we are trying to accomplish with these two new strategies. We have a more than 20-year relationship with Wellington Management, and over the years we've done significant due diligence on the firm and their investment professionals."
John Hancock Seaport Fund seeks capital appreciation by allocating assets to a number of investment strategies through which it will take both long and short positions. John Hancock Investments will allocate assets among several distinct Wellington portfolio teams, with an initial allocation of 35 per cent to diversified equity, 25 per cent to healthcare, 20 per cent to financial services, and 20 to per cent technology. This initial allocation is likely to change over time.
"Our long experience overseeing both asset-allocation portfolios and alternative strategies makes us ideally suited to manage the strategy allocations in the pursuit of risk-adjusted returns," says Zerilli.
The fund employs bottom-up stock picking and fundamental research alongside top-down views on the valuation of various sectors. The ability to short segments of the market – borrowing a security to sell at one price and later buying it back at a lower price – through exchange-traded pooled investment vehicles (e.g. ETFs) and derivatives, opens up a broad area of investment and risk management potential that historically has been beyond the reach of most equity mutual funds.
Arnott says: "The fund employs an investment approach similar to that employed by hedge fund-of-funds and strives to achieve a better absolute and risk-adjusted return than the MSCI World Index over a full market cycle, but with less net equity exposure–roughly 50 percent to 80 percent of the Index, on average."
John Hancock Seaport Fund's four portfolio teams are led by Michael T Carmen and Steve C Angeli (diversified equity); Nicholas C Adams, Andrew R Heiskell, Jennifer N Berg and Mark T Lynch (financial services); Robert L Deresiewcz, Jean M Hynes, Ann C Gallo, and Kirk J Mayer (healthcare); and John F Averill and Bruce Glazer (technology).
John Hancock Enduring Equity Fund seeks total return from capital appreciation and income while aiming to outperform global equities over time, particularly during periods of flat or negative market performance. The fund's global strategy centres on companies with long-lived physical assets, predominantly in the utilities, energy, infrastructure, and transportation sectors. These companies tend to have advantaged competitive positions and exhibit lower levels of earnings volatility due to government regulation or long-term contractual commitments.
"Traditionally used as a hedge against inflation, these companies also have the potential to provide a source of dividend income that is less affected by rising interest rates, a key investor concern in today's market," says Zerilli.
John Hancock Enduring Equity Fund is managed by Wellington Management veteran Tom Levering, whose low-volatility strategy was previously available only to high-net-worth and institutional clients.
Both funds were launched in December of 2013 and are available for sale in Classes A, I, and R6.