Managed by Iyad Farah and Ned Kelly, the fund, which is available for sale in the UK and across Europe, will monitor up to 25 indices across Europe, North America, Asia Pacific and Emerging Markets and will take long positions in stocks due to be included in an index and short those due to be excluded.
Aviva added that each index rebalances between one and twelve times every year.
“Index tracking funds have taken an ever greater share of the market over the past 20 years as investors seek low cost opportunities to gain equity market exposure. However, this rapid growth in passive investment has also created greater anomalies in the marketplace,” said Farah, director of quant solutions at Aviva Investors.
The strategy is designed to be uncorrelated with other asset classes and the fund aims to generate absolute returns of 1 month Euribor plus 5% per annum. Anticipated volatility is less than 7.5%.
“Not only do passive investors by their nature allocate capital in proportion to the market capitalisation of existing companies – suggesting an inefficient allocation of capital – but the rebalancing of indices itself also creates inefficiencies prone to arbitrage,” Farah advised.
The fund is currently registered for sale in the UK, Germany, Switzerland, Austria, France, Spain, Italy, Luxembourg, Finland, Latvia, Norway, Sweden, Netherlands, Belgium.
