01.21.2014

Hancock Launches Low-Vol Equity Funds

01.21.2014
Terry Flanagan

John Hancock Investments has launched two mutual funds targeting lower-volatility equity strategies.

John Hancock Seaport Fund employs a long/short, multi-sleeve equity strategy similar to a hedge fund-of-funds to pursue a more favorable risk/return profile than global equities. John Hancock Enduring Equity Fund invests in companies with long-lived physical assets and competitive advantages that may result in low levels of earnings volatility and offer the potential for dividend income and inflation protection.

“We see a clear need among investors and financial advisors for strategies that have the ability to participate in the market’s upward trend but with less volatility along the way,” said Andrew Arnott, president and CEO of John Hancock Investments. “Both new funds offer the potential for attractive risk-adjusted returns while seeking to minimize risk.”

John Hancock Investments selected portfolio teams at Wellington Management Company, LLP, to manage both funds.

“The new funds are managed by the same Wellington Management portfolio managers who run alternative investments on behalf of institutional clients,” said Leo Zerilli, head of investments at John Hancock Investments. “We believe the portfolio managers we have selected are among the best in the industry for what we are trying to accomplish with these two new strategies. We have a more than 20-year relationship with Wellington Management, and over the years we’ve done significant due diligence on the firm and their investment professionals.”

John Hancock Seaport Fund seeks capital appreciation by allocating assets to a number of investment strategies through which it will take both long and short positions. John Hancock Investments will allocate assets among several distinct Wellington portfolio teams, with an initial allocation of 35 percent to diversified equity, 25 percent to healthcare, 20 percent to financial services, and 20 to percent technology.

“Our long experience overseeing both asset-allocation portfolios and alternative strategies makes us ideally suited to manage the strategy allocations in the pursuit of risk-adjusted returns,” said Zerilli.

The fund employs bottom-up stock picking and fundamental research alongside top-down views on the valuation of various sectors. The ability to short segments of the market–borrowing a security to sell at one price and later buying it back at a lower price–through exchange-traded pooled investment vehicles (e.g., ETFs) and derivatives, opens up a broad area of investment and risk management potential that historically has been beyond the reach of most equity mutual funds.

“The fund employs an investment approach similar to that employed by hedge fund-of-funds and strives to achieve a better absolute and risk-adjusted return than the MSCI World Index over a full market cycle, but with less net equity exposure–roughly 50 percent to 80 percent of the Index, on average,” said Arnott.

John Hancock Enduring Equity Fund seeks total return from capital appreciation and income while aiming to outperform global equities over time, particularly during periods of flat or negative market performance.

“Traditionally used as a hedge against inflation, these companies also have the potential to provide a source of dividend income that is less affected by rising interest rates, a key investor concern in today’s market,” said Zerilli.

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