Deutsche Bank has received regulatory approval from the FSA for the February launch of its Xavex fun...
Deutsche Bank has received regulatory approval from the FSA for the February launch of its Xavex fund of hedge funds. It is to be managed by Deutsche Asset Management's Absolute Returns group in New York.
According to Deutsche Bank, Xavex, which is targeting an annual return of 1215%, is the hedge fund of funds that will open the complicated and diverse universe of hedge funds to the intermediary and general retail market. Deutsche has also moved to clarify its charging structure.
Martin Fothergill, director of investment funds at Deutsche Bank, said the target return is net of underlying charges. The initial charge is 5% and the annual management fee is 1.5%.
The fund is a Guernsey-registered, London-listed investment firm, with a minimum investment of £7,000 making it Isable and available to the broad UK retail market.
The offer period for the company runs from 8 February to 22 March. Trading will begin from 2 April and the fund matures in 2006. It offers 3% commission and 0.5% trail commission.
Fothergill said the fund, which will be headed up by Ray Nolte, will be invested in funds using five main strategies. These are: equity hedge; relative value; global macro; event-driven; and short-selling only funds. He said the number of holdings in the fund will depend on the amount invested but a minimum number would be not less than 20 funds from the 6,000-plus funds in the hedge fund universe.
Fothergill said the target return was based on back-testing over 11 years.
He pointed out that research by Deutsche Asset Management's Absolute Returns group in New York showed that the Hedge Funds Research Index has produced an annualised return for the 11 years from January 1990 of 16.1%, with volatility of 7.3% and a sharpe ratio of 2.2.
That compares with the FTSE 100, which has produced annual returns of 13%, volatility of 15.4%, and a sharpe ratio of 0.8.
According to Deutsche's research, there is also a low-correlation between different hedge funds strategies.
This is indicated by the fact that funds run on global macro strategies and those run on relative value strategies is 0.1, with 1 being perfect correlation.
The low correlation of the hedge funds universe to traditional markets is shown, Fothergill said, in the correlation of 0.4 between the Hedge Funds Research Index with the FTSE 100.
Contact: hedge fund information line on 0845 1200360 or email [email protected]
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