Deutsche Asset Management has announced the launch of the Canadian Fixed Income Alpha strategy.

This innovative fixed income strategy is part of DeAM’s iGAP platform, a leading alpha-generating capability, and is targeted to the investment needs of Canadian institutional investors, says the company.

The strategy’s unique approach to the Canadian market combines Deutsche Asset Management’s strong alpha-generating capabilities with the expertise in Canadian fixed income investing of State Street Global Advisors.

The Canadian Fixed Income Alpha strategy seeks to deliver a target of 1.5% annualized return (gross of fees) above the Scotia Capital Universe Bond Index. To achieve this, index exposure is combined with a Canadian bond alpha overlay strategy. It makes use of SSgA’s Canadian Bond Index strategy, which seeks to exceed the return, and replicate the risk parameters and duration, of the SCU Bond Index. At the same time, DeAM’s alpha overlay strategy has a 1.5% active risk target, and invests in developed market exchange-traded government bond futures and currency forward contracts.

The result is a potential source of exceptional, unique and low correlated alpha for the Canadian fixed income asset class, says the company.

“The launch of this strategy represents DeAM’s continued commitment to meet the needs of Canadian institutional investors including the Canadian pension fund market, which ranks as the fourth largest in the world,” says Stephen Burke, CEO for DeAM – Americas. “By adding a Canadian fixed income strategy to our product offering, we will be able to compete for a significant new pool of assets in the Canadian market.”

DeAM’s alpha overlay strategy falls under its integrated Global Alpha Platform. The investment philosophy of iGAP is the belief that combining a diversity of investment styles within a single portfolio may provide our clients with the benefits of a multi-manager approach: diversification of investments, lack of correlation among strategies, effective risk management and potential for consistent outperformance.

“With iGAP, our goal is to combine a broad range of uncorrelated long/short strategies to maximize a portfolio’s performance,” says Janet Campagna, global head of DeAM’s Advanced Research and Quantitative
Strategies group. “We believe that by incorporating the iGAP platform into a Canadian fixed income strategy, we will fill a need that exists in the Canadian marketplace.”

Geoff Moore, DeAM’s director of business development in Canada, expects that the Canadian Fixed Income Alpha strategy will hold strong appeal for Canadian investors.

“Many institutional investors are examining how to optimally separate or combine their allocations to alpha and beta strategies. DeAM’s new Canadian Fixed Income Alpha strategy addresses this issue by providing a way for investors to diversify their Canadian bond allocations, while seeking significant alpha, all in a single vehicle.”