The product targets returns above 10 per cent a year with a low correlation to equities and bonds
Its portfolio is geared by 50 per cent and split equally between two hedge fund managers – AHL and RMF – who take different investment approaches.
London-based Man subsidiary AHL was founded in 1987 and manages around $20.9bn. It takes a statistical computer-driven approach to identify inefficiencies in over 120 global markets across stocks, bonds, currencies, interest rates, metals, agriculturals, volatility and credit indices. Technical analysis based on historical data is used to identify opportunities to profit from price movement. Factors that determine asset allocation include correlation between markets and sectors, expected returns, trading costs and liquidity.
In contrast, RMF takes a multi-manager approach, researching and selecting specialist hedge fund managers. Markets may include emerging markets, healthcare and the environment. The credit crunch may also have created opportunities to profit from distressed companies who are undergoing substantial change and finding it difficult to refinance. RMF was founded in 1992, was acquired by the Man Group in 2002 and manages around $28bn.
Blending the two investment approaches is designed to reduce risk through diversification across markets and strategies. Additional protection is provided by a 100 per cent capital guarantee from Credit Suisse International. This ensures investors will get their original capital back when the product matures in 2020 and there is also a discretionary profit lock in which potentially increases the guarantee following periods of positive performance.
The guaranteed amount may be increased when net new trading profits rise by 10 per cent of the net asset value or at the end of each financial year once any losses have been taken into account.
The diversity of investment strategy, asset class and region within this product gives it a chance to capture profits throughout the economic cycle, while the capital guarantee provides a degree of security.
Some advisers may question whether a guarantee is needed on a product of this type, but as the portfolio is geared, investors may feel it is worth paying for.