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Absolute funds can hold on to talent

Thames River Multi-Capital says launching Ucits III compliant absolute return funds can be a way for firms to retain talented fund managers.

It says the attraction of the funds for investors is a steady 7 to 8 per cent return but, in many cases, funds have underperformed and Thames says some are just extensions of long-only products that have delivered exceptional returns.

Thames says the leaders and followers in the absolute market are going to change. It points to 100 new launches across Europe in the last eight months. Many entrants are hedge fund managers using their hedge experience and techniques to produce absolute returns in a regulated framework. But it expects some of these hedge fund managers to return to the high-fee hedge fund world.

Most Ucits III absolute return funds charge performance fees, which are growing in popularity, according to Thames.

It says the number of IMA fund groups which charge performance fees has risen to 38 per cent from 27 per cent over the last 12 months but Thames co-heads Rob Burdett and Gary Potter point out that performance fees usually come with a cap on the size of the fund, so the manager’s interests are aligned with the investor rather than trying to keep growing the fund.

Burdett says: “The quality of investment managers coming to the absolute return sector is the highest we have seen and it is here to stay. There is a lot of talent coming in to the sector, such as Philip Gibbs at Jupiter and Ajay Gamb-hir from RWC Partners.”

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