Absolute Fund Management is attempting to boost its fund of hedge funds by tapping the intermediary market with the launch of new share classes that pay commission and trail fees, and by reducing its performance fee on those new classes.
For the Absolute Fund there will now be intermediary-friendly US dollar, sterling and euro classes, all offering commission of up to 3.5% and a trail fee of 0.5%.
At the same time, the firm has reduced its performance fee to 10% of gains between 6% and 24% for the new shares compared to a performance fee of 15% for the fund's existing shares.
The new shares will be launched via an initial offer period scheduled to close on 31 October. Prospective investors may apply in the initial offer to purchase the new shares at prices of $100 and E100, plus a discretionary front-end charge of up to 3% per share. There is also an additional trail commission of 0.5% thereafter.
Christopher Aldous, chief executive of AFM, said: "The new share classes have been launched in response to feedback from intermediaries. The fee structure on the existing share classes did not allow for sufficient incentives to be paid to distributors and this was naturally a concern for us when the marketplace is so competitive. We believe that the commission arrangements on the new share classes are now at least as generous as those available on other funds."
The Absolute Fund is an open-ended single fund of hedge funds with the primary objective being to seek consistent returns on an absolute basis, irrespective of trends in equity and bond markets, and to preserve capital at all times.
Aldous said: "Although equity markets have performed well so far this year, they are still well down on the levels of 2000 and many commentators including ourselves are questioning the sustainability of the recent rally.
"In our view, funds of hedge funds should be seen as an integral component of any balanced investment portfolio. They are also an equally valid and compelling alternative for bonds and cash."
Although the minimum investment level is $100,000, intermediaries can aggregate individual investments thro- ugh a nominee account or if appropriate through a third party aggregator in order to enable individual investors to invest smaller amounts than the minimum specified.
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