Barclays Global Investors is to follow its currency fund launched on 6 August with plans to launch a UK small-cap long/short hedge fund.
The long/short fund is still in the early stages of development, but could be available to investors in the fourth quarter.
Barclays Global Investors has set capacity at $1bn in assets under management for the Dublin-based BGI Currency Fund, which invests in 11 currencies including the dollar, euro, pound and yen, with the euro being the favoured currency, according to Mark Fitzgerald, director of the alternative investment group at Barclays Global Investors Europe.
The launch builds on the existing currency management services Barclays Global Investors uses in its overlay strategy - so called because it sits on top of a clients underlying assets and seeks to maximise performance through lo- risk currency bets.
Three signal families - fundamental value, economic environment and market sentiment - which include nine under- lying signals, are used to identify currency trends, said Fitzgerald.
Fundamental trends and economic environment signals give a long-term picture of trends, while market sentiment tracks short-term moves. Currency funds are a very safe investment compared to other strategies, said Fitzgerald.
"Only 10% of currency market dealing is by profit-motivated players," he said. "The market is dominated by non-profit players and Barclays Global Investors can exploit inefficiencies in the market that come from that."
Among currency funds around 80% outperform the benchmark, whereas among active equity managers around 80% underperform it, he added, so investors in currencies are more secure.
The size of the market means there should be no liquidity problems if a manager invests in the main currencies.
The currency fund has a target alpha of 8% net of fees with risk of 10% to 12%. The annual management charge is 1%, with a performance fee of 20% on returns above the benchmark.
Minimum investment in the fund is E250,000 or the currency equivalent. Investors can purchase or redeem on any business day.
Barclays Global Investors manages more than $28bn in currency strategies globally and transacted over $200bn in foreign exchange last year.
The company manages more than $5bn in hedge fund strategies, and has assets of over $767bn.
Irish border, resignations, market volatility and more
Revealed – successes across all 11 categories
Fidelity International multi-asset CIO James Bateman talks to Julian Marr about recent market volatility, portfolio positioning and his thoughts on the coming year
Follows Phil Young
‘Positive so far’