Matrix Securities is looking to launch a fund of hedge funds into the IFA market later this year. T...
Matrix Securities is looking to launch a fund of hedge funds into the IFA market later this year.
The proposed fund of funds will be managed by US firm Tremont, a fund of hedge funds specialist.
It will be given a mandate to run a product which can produce returns of 12% to 14% a year.
As part of this the aim is to provide positive returns on a monthly basis. Matrix is market testing the concept of such a product with the intermediary market and is looking to launch in the final quarter of 2000.
The product is likely to have exposure mostly to US hedge fund managers and Tremont will run a portfolio with funds from around 15 different managers.
The portfolio will focus on four hedge fund or alternative investment strategies including long/short equity, where the fund manager looks to make money from selling stocks which go down as well as holding stocks which go up, and market neutral, which hedges out whether the market goes up or down and focuses on returns from stockpicking.
The proposed Matrix fund will also focus on event-driven strategies, which include merger arbitrage and distressed security investing.
Merger arbitrage is where fund managers look to benefit from the mispricing of the stocks of companies about to merge while distressed security investing involves putting money into the secured debt or equity of companies in financial distress in the expectation of benefiting from a rescue package.
The proposed fund of hedge funds will also have exposure to convertibles arbitrage, where the fund manager looks to benefit from the mispricing of convertible stock relative to equities.
The likely initial charge for the Matrix product is 3% with a 1.75% annual management fee and all prices will be quoted in sterling, rather than in dollars which is usually the case with hedge funds.
The minimum investment in hedge funds is usually high, at around £100,000, but Matrix is looking to have a starting level in its product of £10,000 as a means of encouraging broader interest.
The minimum top-up investment will be £5,000. The proposed IFA commission rates are 3% initial and 0.375% renewal.
Bridget Cleverly, product development director at Matrix, said: "The phrase 'hedge fund' has been misused and as a result these products have the wrong characteristics attributed to them. People think about LTCM and that they are high risk, high return and only available for rich people. But hedge funds are really at the opposite end of the market and the industry is incredibly diverse. We prefer to refer to them as alternative investment strategies rather than hedge funds."
The Matrix hedge fund of funds will be an offshore unauthorised fund and will be domiciled in the Cayman Islands. Cleverly said it could only be marketed to the 4,500 IFAs authorised to recommend unauthorised offshore collective investment schemes, as well as to professional investors such as discretionary investment managers.
At present the group intends to have monthly dealing dates at which new investors can come into the product and quarterly exit dates. The liquidity of the vehicle is one issue which it is keen to market test with intermediaries.
In the past Matrix has launched a VCT and is in the process of setting up an Oeic. Contact 020 7292 0800.
Underperformance still present – for now
Regtech or fintech
15% increase in number of claims paid
Open architecture philosophy
Inflation above 2% for first this this year