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RPMI Railpen seeds pair of factor investing funds

RPMI Railpen seeds pair of factor investing funds

The Railways Pension Scheme (RPS) manager RPMI Railpen has co-created two factor-allocated equity funds with Geneva-based boutique Unigestion and provided seed capital for both vehicles.

The funds are a long-only active factor strategy, combining a number of identified factors, and a long/short factor fund, which follows a market neutral, pure alpha strategy aiming to profit from both positive and negative factor exposure.

Geneva-based Unigestion said the strategies will allocate to higher quality value stocks, less volatile momentum stocks, more diversified quality stocks and more stable small cap stocks.

The portfolio construction will be determined through a top-down macro as well as stock-level risk assessment.

Commenting on the launch, Unigestion’s head of equities Alexei Jourovski who is Citywire + rated, said: ‘We believe that factor allocation can be improved by better risk management, taking into account market and sector characteristics and actively assessing top-down and stock-level risk in the portfolio construction.’

‘Moreover, as equity factors tend to be cyclical, we can significantly improve the risk return profile of the strategy by allocating between factors at different points of the market cycle.’

Speaking to Modern Investor in December, Unigestion’s investment director for equities Bruno Taillardat said that some institutional investors are looking to replace some of their active strategies with pure exposure to specific beta factors as they are questioning the ability of long-only value equity managers to produce alpha.

Despite this trend, Taillardat believes passive strategies have some pitfalls, and their portfolio construction can be very basic. ‘We still think that an active manager can provide a more robust portfolio construction, as well as a focus on the value beta factor,’ he said.

RPMI Railpen manages the assets of the Railways Pension Scheme (RPS) on behalf of its parent company the Railways Pension Trustee Company.  Railpen Investments, its investment arm, has currently £21 billion (€27.5 billion) under management.

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