Barclays Global Investors has launched a market neutral hedge fund focusing on the largest 500 stock...
Barclays Global Investors has launched a market neutral hedge fund focusing on the largest 500 stocks in developed Europe excluding the UK. It aims to return investors 10% annually above three month Libid, after fees on a volatility of 10% per annum.
Jonathan Lamb, BGI's senior portfolio manager for market neutral strategies, said the portfolio will hold between 300 and 400 positions, and up to 3% in any one stock, with position sizes dependent on individual stock liquidity.
The fund will invest in developed Europe, but currently not in Greece, where Lamb believes the costs of shorting and trading do not suit BGI's approach.
He said taking many stock positions was intentional to benefit fully from BGI's fundamental research.
'The fund is the original hedge fund concept, bearing out just the results of our research and neutralising other unwanted risks. We tend to hold a large number of positions because we are more likely then to achieve the results we see in our research,' Lamb said.
BGI runs another two market neutral funds, focusing on the top 350 UK stocks, one portfolio geared and one ungeared. The ungeared fund has returned investors 12.3% annualised since launch and the geared proposal 23% (net of all fees), according to the group.
BGI's stock analysis examines fundamental metrics such as profit forecasts and balance sheet data, as well as looking for accounting anomalies, to make selections, and also a quantitative model that ranks stocks by share price prospects.
The European Equity Market Neutral Fund's managers will keep the portfolio's net sector positions small ' so it will not take large bets of banks over telecoms, for example ' as well as being market capitalisation and thematically neutral.
The Dublin-domiciled and listed fund will be geared, buying E2 of long and E2 of short positions for every euro invested, and has a final capacity of E500m investments, representing a total geared portfolio size of E1bn. Currently, Lamb said, the fund has about E190m invested or committed for investment.
Lamb said investors could reduce the gearing on their investments by allocating assets to cash funds. The fund has no lock-in and liquidity each Wednesday and start of each month, and a minimum investment of E250,000, or its US dollar equivalent for dollar investors.
The fund carries a 1% subscription and redemption fee so the returns of long-term investors are not damaged by those entering and exiting the fund regularly, and a performance fee of 20% above the three month euro cash rates for euro investors, or three-month dollar cash rates for dollar investors. The performance fee has a high water mark.
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