Equity volatility tends to be inversely correlated from traditional asset classes such as equities and therefore offers the twin benefits of diversification and extreme risk mitigation. AXA Investment Managers has launched the AXA WF Equity Volatility Fund offering institutional investors cost efficient, positive exposure to the implied volatility of major equity markets.
AXA WF Equity Volatilityseeks to capture significant increases in equity volatility in the European and/or US equity markets while partially mitigating the cost of carry of this exposure. The Fund achieves this by building a long position in implied volatility of the S&P 500 index and/or the Euro Stoxx 50 index through derivatives. In order to mitigate the cost of carry of this long position, the Fund has the flexibility to opportunistically take short positions on the near term implied volatility through the use of indices futures.
Laurent Ramsamy, lead fund manager of AXA WF Equity Volatility said: "Volatility, if managed dynamically, is not a mere measure of risk, it is also an attractive source of diversification and performance, especially for investors exposed to riskier assets. The challenge, however, is how to provide the long term long volatility exposure in a cost efficient manner. The strategy is designed to offer timely protection and strong gains when equity markets move into crisis mode."
As noted in the press release, AXA IM has a proven track record in managing volatility instruments, including the use of derivatives: “Our extensive experience and robust risk management underpins this Fund and ensures compliance with European regulations. Our Multi Asset Client Solutions team has been trading derivatives within an asset liability matching framework for institutional investors since 1997, with €77 billion notional value in derivatives for major hedging programs”.
Laurent Seyer, Global Head of Multi Asset Client Solutions at AXA IM, commented: "AXA IM's understanding of volatility trends and proven derivatives expertise enables us to react quickly to market movements, thereby dynamically managing exposure to equity volatility consistent with prevailing market conditions in a cost efficient manner. With short term equity volatility at near historical low levels we believe this is an opportune moment to launch this fund".
AXA WF Equity Volatility, which launched on 12 February 2013, is a UCITS regulated fund with active risk monitoring and controls.