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Absolute move for Merrill

Merrill Lynch is introducing what it claims is the first long/short fund with hedge fund characteristics.

The UK absolute alpha fund is the first in this country to take advantage of Ucits 3 regulations to allow conventional long-only investments alongside short selling of stocks where it considers a stock price will decline.

Merrill Lynch believes that other fund firms will follow it into this uncharted territory and in a few years it considers that retail absolute return funds will be commonplace.

The fund will be managed by Mark Lyttleton and is aiming to achieve a positive return for investors in all market conditions.

Unlike a hedge fund, the Merrill Lynch absolute alpha fund cannot leverage its portfolio by borrowing additional money to invest although it can use derivatives to imp- rove performance and can invest in cash.

Minimum investment is 10,000 and the fund has an annual charge of 1.75 per cent. Initial charge is 5 per cent. Commission is 3 per cent initial and 0.5 per cent trail.

Merrill Lynch says the fund’s investment process has been paper-traded for a year and it is expecting a return well in excess of cash.

Managing director, UK retail business Richard Royds says: “This is a pioneering unit trust and in a few years time the idea of absolute returns will be standard in this country. We are confident that this fund provides a highly attractive new strategy for investors under intermediary advice.”

Hargreaves Lansdown head of investment re-search Mark Dampier says: “Merr- ill Lynch is a group under- going a rejuvenation and I am impressed with Mark Lyttleton.

“There is definitely room in the market for this because it is the closest you can get to a hedge fund. It will not outperform in a raging bull market but its tortoise approach will make money over the years.

“By being the first into the market, the fund could be successful although IFAs will not pile in there is a few years’ performance to go by.”


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