RM Funds is raising a fund which will invest roughly one-third each of its capital in alternative lending, specialist real estate and infrastructure.
Pietro Nicholls, a principal and investment manager at RM Funds, told PDI that the open-ended fund will seek to raise no more than £500 million over the next two to three years from small institutions and retail investors.
He said for investors looking for a safe haven, the lower risk-return end of the alternatives spectrum looks a better bet than many of the other options. “Government bonds are panning out badly,” he said. “In Italy you’ve seen government bonds going from negative to positive in 10 minutes. There’s a feeling of Wild West about it and government bonds don’t look like safe haven, risk free assets.
“Alternatives are less well known but they have proved their worth and they are looking quite stable by comparison.”
Asked about the timing of a defensive fund, Nicholls said: “The fund has been in development for around nine to 12 months and we could see tougher conditions coming. We thought the market would be in a very different position, and that’s the message we’re hearing now.
“The feedback for the fund is very positive and we share investors’ bearishness. We used to say we were cautiously optimistic, but now we think things are looking quite challenging both in the US and Europe.”
The fund, called VT RM Alternative Income Fund, will invest in “defensive, income producing” assets and will target 5 percent annual income distribution and a total target return of between 7-8 percent.
It claims to offer “interest rate and inflation protection in a low yield and rising interest rate environment” and will select investments with “low correlation to the wider equity and fixed income markets…underpinned by contracted cash flows and tangible assets”.
RM Funds said fund charges would be capped at 0.85 percent.
RM Funds is the trading name of RM Capital, which specialises in alternative credit fund management, capital markets and advisory, sales & trading, and foreign exchange. Founded in 2010, it has offices in Edinburgh and London.