move designed to take advantage of altered uk regulations on semi-closed vehicles
Threadneedle is in the process of launching the UK's first limited issue fund, to be managed by Mark Holden of its UK high alpha team.
It will be the first fund to take advantage of the altered UK regulations allowing groups to offer a semi-closed vehicle and recognise cash as an investment.
The as-yet unnamed fund will be limited to £100m in size and run as a highly concentrated best ideas portfolio, with the ability to invest up to 100% in cash and 10% in a single stock.
While it will have wide powers on liquidity, it is unlikely to go above 50% in cash, according to Threadneedle.
Annual management fees will be performance-related, with a partial rebate paid to investors should the fund underperform a given benchmark over a specified period. Threadneedle is still working on the details of this structure.
The group is now in the process of launching a new Oeic umbrella in which to house the forthcoming fund and has earmarked a second quarter launch. Limited issue funds are technically Ucits compliant, but as few other European countries have yet to adopt the wider investment rules, it will be some time before it can be sold into Europe. If the fund was launched within Threadneedle's existing Oeic, it would render the whole umbrella impossible to sell into Europe until further countries adopt the new Ucits rules.
The new Oeic will enable subsequent limited issue funds to be launched once the UK fund has built up a track record, with specialist offerings most likely to be considered initially.
The limited issue range will sit between the group's select growth and hedge fund ranges as quasi-retail, absolute return vehicles. This is reflected in the fund's charging structure and minimum investment levels.
Guy Beech, sales director at Threadneedle, said although not yet finalised, the threshold would be below that of a hedge fund but above the standard Isa limit, rather than the group's standard retail minimum of £2,000.
Paul Findlay, head of the UK high alpha team at Threadneedle, said: 'There is clearly appetite in the retail and institutional markets for higher alpha funds that are not just trying to beat a falling index by 2%-3%.
'It is a difficult environment but it looks like we are coming to a point where we can buy some very good companies at attractive valuations.'
The fund will typically run with a highly focused 30-stock portfolio with no restrictions on sector or market cap exposure. He added turnover would vary depending on market conditions moving forward and correlation between the fund's holdings and the long book of Findlay's Crescendo hedge fund are expected to be high.
Findlay said: 'There is a lot of forced selling in the market with programmed trades going through that cannot be stopped, resulting in market makers ending up with lines of stock they just want off their books. In this environment, cash is king.'
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