Northwater Capital Management Inc. announced today the launch of the Northwater Enhanced Long Bond Fund.

The fund is designed to play a key role in support of liability-driven investing strategies. This new approach has become popular among many pension plans looking to better match their liabilities against their existing investment portfolio, while still providing sufficient opportunity for enhanced returns.

The fund features an innovative portable alpha mandate that targets an after-fee return of 175 to 325 basis points in excess of the Scotia Capital Long Overall Bond Index.

The duration of the index is approximately 11.5 years, reflecting the interest rate sensitivity of many defined benefit pension plan liabilities.

“Plan sponsors are looking for ways to add significant value to their bond portfolio – with the flexibility of allocating to both mid-duration and longer-duration benchmarks to better reflect their plan’s liability profile,” says Stephen Foote, vp, Northwater Capital. “The Enhanced Long Bond Fund provides this flexibility in targeting a longer-duration benchmark – with the benefit of a fund manager who has managed portable alpha mandates for over eight years.”

The fund uses Portfolio Platform — Northwater’s full-service policy implementation offering — to achieve synthetic exposure to the Scotia Capital Long Index. It complements Northwater’s current suite of enhanced pooled funds for Canadian institutional investors, all of which have over five year track records. These other funds are benchmarked to the Scotia Capital Universe, S&P 500, and S&P 400 indices, and like the Enhanced Long Bond Fund, utilize Northwater’s market-neutral fund of hedge funds as the active management engine.

Northwater believes Canadian defined benefit pension plan sponsors will benefit from having portable alpha products benchmarked to both the Universe and Long-bond indices.

Founded in 1989, Northwater is an employee-owned investment company with offices in Toronto, New York and Chicago. The firm has $10 billion in assets under management.