Search on for alternate offshore market for Global Focus hedge fund hybrid
BDT has been debating with data providers on where to place its Global Focus Fund as the vehicle appears to be a hybrid of a hedge fund and a long only portfolio.
Lipper has decided to place the portfolio in the Mixed Assets Flexible sector, rather than the global equity sector, due to its high bond weightings. The Micropal sector has not yet been decided, the group said.
The fund, launched three months ago, is a Ucits-compliant, FSA-recognised and Imro-regulated collective investment scheme, however, it is also an absolute return fund, something generally reserved for hedge funds only.
Run by Rob Brewis and Henry Thornton, both previously with Colonial First State, along with Simon Dobson, previously a fund manager at GT, the Dublin-domiciled fund may be entitled global but the investment universe is the world minus the UK, US and Europe.
Instead it focuses on the three manager's areas of expertise: the Far East and Asia, emerging markets and Japan.
The portfolio aim is to hold some 40 stocks, although at the moment it is still some 38% liquid, holding a mixture of cash and Treasury bills. The managers try to select stocks with an idea of initially weighting them at 2%, although they do allow holdings to reach 4%-5% of the portfolio.
Thorton said: 'We aim for lower volatility than long only funds, which invest in these regions. We do not take enormous punts on stocks but we do try to keep the portfolio very focused.'
One of the key features of the management of the portfolio, Thorton said, is its sell discipline. 'We are looking to provide significant absolute returns with 12 to 18 months after investment in a stock but we do have a shorter term discipline of a cut loss limit of a stock falling 10% from cost. It is a bad habit of managers not to sell quickly so we try to admit our mistakes early and correct it. The problem is not in buying the stock but in being too stubborn to admit you have made a mistake.'
At the moment, due to the team's investment stance, the fund is more invested in the emerging market regions then in Japan, Thorton said.
Negative on Japan at launch, the managers do see some value coming back into the market but not quite yet, Thorton said. The team believes the current cycle is stronger than previous ones in Japan and the market still has a way to fall.
'Emerging markets are a long-term story and should provide three to four years of performance. Asia is the one to focus on there. Property reform in China is the biggest story for the next 10 years. Four out of five emerging market investment opportunities are domestically oriented companies and countries in the region are starting to stimulate their domestic economies so we are optimistic.'
The team is also keen on countries such as India and Brazil but notes that there is no sense just looking at the macro environment in these regions to determine when to invest.
Thornton said: 'A large portion of the Indian economy is based on agriculture, as is Brazil's. If it rains we are in there, but if it doesn't the regions will be badly hurt.'
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