German investors can for the first time access a diversified portfolio of hedge fund strategies via ...
German investors can for the first time access a diversified portfolio of hedge fund strategies via a new vehicle from Commerzbank Securities.
Kevin Ferro, global head of AIS, the alternative investment strategy group owned by Commerzbank Securities and based in New York, said: "It has been extremely difficult from a regulatory perspective to provide these types of vehicles to German investors. It took us over six months of research to come up with a suitable structure for the new product, COMAS-1."
Ferro would not provide details of the structure but said the security the investor buys is technically 'disconnected' from the underlying portfolio of hedge funds in which it invests.
Portfolio construction is actively managed by Ferro's team at AIS and will aim to provide absolute returns with low volatility, regardless of market direction.
He said: "There are around 25-30 underlying funds in the portfolio, offshore-based funds run by external investment managers in the US and London. There will generally be seven or eight core strategies, with a number of underlying managers for each strategy to diversify business risk."
Key areas will include the major arbitrage strategies, including equity and fixed income, as well as event driven strategies, including merger arbitrage, risk arbitrage and other catalyst-driven trading strategies. There will also be a number of futures managers and little exposure to long/short equity managers, according to Ferro.
"AIS is an established player in the funds of hedge funds market with hundreds of millions of dollars under management. It has good relationships with large numbers of hedge fund managers, many of whom are technically closed to new investors," he said.
There is a strong emphasis on actively managing the portfolio and monitoring performance, although Ferro said there is relatively low turnover in managers.
The fund will be marketed to high net worth German individuals and to institutions. Minimum investment is e20,000 .
Ferro said that although this was the first product to use the new structure, other managers were believed to be considering launching similar vehicles. Commerzbank Securities will launch further similar products this autumn.
"We anticipate significant demand from German investors for diversified alternative investment products, particularly in the light of the recent volatility in major equity markets," he added.
Based in New York and Frankfurt, AIS designs, structures and manages portfolios of alternative investments with a particular emphasis on hedge funds.
£300bn of liabilities
View from the front row
Transfer from occupational scheme
Appointed by FCA and PSR boards