The hedge fund weighting of the £94.7m Scottish Value Trust has been increased to 28% as manager Col...
The hedge fund weighting of the £94.7m Scottish Value Trust has been increased to 28% as manager Colin McLean seeks performance in a lacklustre market environment.
The trust began investing in hedge funds two years ago, when the board set a 30% ceiling on allocation to the asset class.
'They had set the limit at 30% but didn't want us to move there right away but as the allocation has been successful, we are moving up to that upper limit,' said McLean, who is also managing director of SVM.
'Our hedge fund exposure has tended to increase relative performance particularly against a weak market background.'
He said the trust may also extend its hedge fund exposure beyond 30% in the future, as the global market outlook remains generally downbeat.
McLean said the trust mainly buys mainstream equity hedge funds including long/short and global macro funds, avoiding riskier plays such as convertible arbitrage and merger funds.
The hedge fund purchases have been financed through the unwinding of the trust's warrant and other small exposures, particularly stocks remaining from the merger with the Warrants & Value investment trust in 2001.
He has also used cash from the liquidation of the JF Japan OTC fund, which comprised 4.8% of the portfolio at the end of December.
The trust's main hedge fund investments include Henderson Absolute Return Portfolio, Cadogan Alternative Strategies, Aspect European Equity fund and Horseman Global fund.
Any further holdings would likely be in new funds, he said.
The trust is currently 15% net geared, short of its maximum 20% and in the middle of its typical 10%-20% band.
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