vehicle exposed to hedge funds run by russell, pegrum, rice and love
Cazenove Capital Management is to launch a Guernsey-based closed-ended fund of its hedge funds offering access to star manager Tim Russell and targeting a 10% pa return after fees.
The vehicle, which will be Aim-listed and capped at £150m, is to provide equal exposure to two hedge funds run by Russell and one apiece from Cazenove managers Neil Pegrum, Chris Rice and Tim Love. Four of these are closed to new investors.
The Cazenove Capital Absolute Trust will have a minimum entry of £1,000 and be eligible for Sipp investment as well as for Peps and Isas.
As there will be no named manager on the vehicle, there will be no management fee at fund level, with the annual management charge on the underlying products averaging 1.4%.
A performance fee of 20% on all returns will also be levied.
The product carries no initial charge and discussions are ongoing regarding commission. However, if an intermediary wanted to take an initial commission then a charge, most likely 3%, would be built on to the product to cover that.
The 20% weightings to each hedge fund will be rebalanced on a monthly basis and, if Cazenove launches further long/short products in the future, there is the capacity to add them in.
Robin Minter-Kemp, the firm's managing director, said based on the historic performance of these portfolios, the Cazenove Capital Absolute trust's expected volatility is less than half that of the respective equity markets.
"Historically, the trust would have achieved 12.2% in annual returns with volatility of about 3%," he said.
"These hedge funds are completely independent of the market and are designed to outperform cash. Because they can make money when the market falls, they will have minimum correlation. If you look at UK Equity Absolute Return, for example, its beta since launch in November 2003 is 0.07."
In terms of the product's underlying holdings, at the end of May the UK Equity Absolute Return had 70 long positions and 55 short with its largest net sector position, at 3.8%, to oil and gas producers.
underlying funds at launch
UK Equity Absolute Return - Tim Russell
Leveraged UK Equity Absolute Return - Tim Russell
UK Dynamic Absolute Return - Neil Pegrum
European Equity Absolute Return - Chris Rice
Worldwide Absolute Return - Tim Love
Guernsey-based fund with Aim-listing
Access to five in-house hedge funds, equally weighted exposure
In back-testing product produced 12.2% pa returns with 3% pa volatility
Fund to be capped at £150m
No preferred charging model
To 1,552 families and businesses
HL and Liberty SIPP slowest
Lifetime and annual allowances