Toronto-based Mackenzie Investments Inc. has added to its liquid alternative lineup with a new fund focused on private equity strategies.
The Mackenzie Private Equity Replication Fund offers retail investors access to the returns and volatility management typically associated with private equity buyouts.
“Private equity has historically exhibited less downside than traditional investments during periods of market stress and has outperformed public markets during challenging economic conditions,” said Michael Schnitman, senior vice-president and head of alternative investments, Mackenzie Investments, in a release.
The fund aims to outperform the Russell 2500 Index by investing primarily in U.S. small- and mid-cap stocks that are publicly traded and have similar characteristics to private equity investments, such as high-quality companies with elevated profitability and attractive valuations.
The fund’s managers will use financial leverage to replicate the leveraged buyout strategy used by private equity firms as well as a hedging strategy to help manage volatility.
“We believe that through dedicated research and quantitative expertise, public markets can be leveraged to achieve similar returns and volatility levels to that of U.S. private equity in a format that offers investors daily liquidity, high transparency, and low investment minimums,” Schnitman said.
The investment strategy was developed in partnership with Randolph Cohen, an economist and senior lecturer at Harvard Business School. Cohen is also a co-founder of Boston-based PEO Partners LLC, an asset-management company.
Arup Datta, senior vice president, head of Mackenzie global quantitative equity team, and Nelson Arruda, senior vice-president, portfolio manager and co-lead of the Mackenzie multi-asset strategies team, will manage the fund. PEO Partners will sub-advise the fund.