EUROPE - A large Dutch pension fund has registered interest in Crédit Agricole Asset Management's (CAAM) exploitation of volatility as a hedge against equity market corrections.

Emmanuel Bourdeix, head of equity satellite teams at CAAM in Paris, confirmed to IPE that a "large Dutch pension fund" was interested in putting some of its 5% alternative allocation into a CAAM volatility strategy.

Yesterday IPE revealed that PGGM, the Dutch healthworkers' scheme, owns almost two-thirds of Michael Wexler's Maple Leaf Macro Volatility Fund, which has assets of approximately $110m (€80.7), according to Hedgeweek.

CAAM has just launched a Luxembourg-registered SICAV version of its French volatility equity fund. Together the funds have assets in excess of €1.5bn, although the majority is with the French version, open since December 2005.

Bourdeix said he was surprised at the lack of commitment to volatility strategies thus far by institutions. "We do not know why because it would be a good hedging element," Bourdeix said. "But maybe it is because volatility investment does not fit into a specific box like equities and bonds."

Ian Milton, head of institutional business UK & Ireland, thinks that like with all new products pension funds are more cautious when it comes to placing investments.

Bourdeix knows that some investors shun volatility because they do not think it will rise, after four years of extraordinarily tranquil growth. "We are not trying to tell people that volatility will keep on rising. But you want to buy into volatility when it is low - as it is at the moment - to make use of the spikes experienced during market corrections."

After such spikes there was enough time to go out of the investment as volatility never went down as quickly as it had gone up, according to Bourdeix. The fund offers an adjustable exposure to volatility to benefit from the mean reversion of equity volatility identified by CAAM at around 25%.

Crédit Agricole has also launched a Dynarbitrage High Yield fund. It uses long/short strategies and is set up to bring diversification to a fixed income portfolio.

Laurent Crosnier, head of inflation, duration and credit management at CAAM in Paris, pointed out that the high yield market's Sharpe ratio over the last 20 years was 0.82 compared to 0.60 of the stocks in the Standard & Poor equity index.

Currently 67% of CAAM's worldwide €534.8bn in assets under management are institutional assets.

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