Private investors will have access to yet another hedge fund next month when Close Fund Management, which already runs a couple of capital-protected hedge funds for UK investors, launches a new multi-strategy fund.
It is teaming up with BlueCrest, a well-known US hedge fund manager with more than $9bn under management.
As hedge funds slowly enter the mainstream, wealth managers are seeking to tap into growing awareness of these funds. The main attraction of hedge funds is that returns are normally not closely correlated to mainstream asset classes such as bonds or equities, making them an attractive diversification tool for investors.
But returns can still be volatile. Last October was a tough time for hedge funds, many of which seek to deliver positive returns in both bull and bear markets. Over this month, 10 of the 11 hedge fund indices tracked by HFR Asset Management fell. Since then, however, hedge funds have had a much better time. The Credit Suisse Tremont hedge fund index was up 1.82 per cent in March and almost 5.5 per cent so far this year.
Marc Gordon, managing director of Close Fund Management, says its new fund will follow a multi-strategy approach investing in seven different hedge funds managed by BlueCrest.
Initially, almost a third of the fund will be invested in BlueCrest Equity fund, which takes both “long” and “short” positions on stocks, in theory enabling it to profit from both share price rises and falls.
This fund seeks to follow a “market-neutral” strategy, meaning it should be unaffected by a stock market crash.
Gordon says the new Close All-Blue fund is different from other hedge funds of funds as all hedge fund allocation and strategy decisions are taken by BlueCrest.
With a hedge fund of funds, a separate manager selects different hedge funds for investment. This gives investors greater diversification but it also adds to the cost.
A typical hedge fund of funds may charge 1.5 per cent annually on top of performance fees of around 10 per cent of positive returns.
The Close AllBlue fund will charge 0.8 per cent annually on top of the underlying hedge fund charges.
The new fund will be listed on Aim, the junior exchange. Close hopes to raise £200m but has set itself a minimum target of £50m. The minimum investment is £37,500.
It joins a growing number of hedge funds available to private investors. Six hedge funds of funds are managed by Matrix Group, a financial services company which sells through financial advisers. Global Asset Management also manages several hedge funds of funds.
