Bank of Bermuda is set to launch a global fund of hedge funds, intended to offer a diversification t...
Bank of Bermuda is set to launch a global fund of hedge funds, intended to offer a diversification tool for high net-worth individuals, with a minimum investment of $10,000.
The selection of underlying investments will be done by Banque Notz Stucki, a Geneva-based partnership formed by Bank of Bermuda, Banco Santander Central Hispano and the partners of Notz Stucki & Cie.
The All Points Fund of Funds Alternative Class, already internally seeded with $65m, has 50% exposure to long/short equity managers and a 50% exposure to low volatility and market neutral strategies, including index arbitrage, convertible bond arbitrage, global fixed income arbitrage, mortgage-backed securities and event-driven strategies.
The current strategy split is 30% long/short US, 16% long/short Europe, 7% long/short Asia, 42% arbitrage and 5% cash.
Adrian Fairbourn, head of investments Europe at Bank of Bermuda, said: "The objective of the fund is to provide equity-like returns with reduced volatility. We have been running it purely internally for the first three months of 2000 and the return so far has been 12.21%, with a return of 0.62% for the month of January when most markets showed a net loss. However, the figures are only part of the story. A big part of our process is due diligence. The relationship between manager and investor is much tighter in the hedge fund world than it is in the mutual fund sphere. We aim to have an ongoing relationship with managers whereby their investment performance and process are placed under constant scrutiny.
"We have leveraged the bank's extensive experience as a service provider to hedge funds to establish a rigorous manager due diligence process, particularly on the back-office side where more in-depth diligence could well help to prevent a situation like the recent Manhattan fund blowup.
"This disaster involved a number of funds of funds investors."
The long/short component is made up of 17 funds.
Fairbourn said: "There are two principal reasons for this. First, we are insulated in the unlikely event of a fund blowing up and second it means we can carry a proportion of managers with a higher risk/return profile without threatening the fund as a whole."
Although the low minimum aims the fund at private clients, the strategy can be varied to a certain extent for institutions, Fairbourn said.
He added: "For investors of sufficient size we can run the fund in some ways like a managed account, depending on the risk profile the client demands."
The fund charges a single wrap fee of 1.75% to cover custody, advice, administration and management. There is a front-end load fee of up to 5%.
There is no additional performance fee, with underlying funds' returns being received by the fund net of performance fees.
The initial offer price is $100 per share. The minimum investment is $10,000 and $5,000 for additional investments. Valuations are monthly.
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