Close Fund Management has teamed up with hedge fund specialist Man Investments to offer the Close Man hedge fund, a capital protected fund of hedge funds.
This Guernsey-domiciled product is available to investors with a minimum of £10,000, which is low for a hedge fund product. It aims to provide a return of between 13 per cent and 15 per cent a year during the investment term of eight years and six months.
The fund invests in a range of hedge funds selected by Man Global Strategies, an investment division of Man Investments. The investment team has been honing its asset allocation skills since 1996 when Man-IP-2220 was created. Because of its experience in the market, Man Investments can attract good fund managers.
The capital protection will be provided by the Royal Bank of Scotland, so investors will get their original capital back regardless of how the underlying investments perform. However, if investors redeem their shares before the end of the term, the capital protection may not apply and they could get back less than they put in.
The hedge fund strategies used in the portfolio include arbitrage, equity hedge, long & short equities, managed future and multi-style strategies which combine a range of strategies. The merit of the multi-manager, multi-strategy style is diversification, so one manager or style can compensate another that is not doing so well.
The Close Man hedge fund will blend different managers and style to create an acceptable level of risk for the level of return it is seeking. High leverage may be used to ensure the target returns are met and the underlying funds may also be highly geared. This can be very risky but the presence of the capital guarantee may mitigate the risk in a way that conventional hedge fund of funds cannot.
Like the recent offering from Tilney Investment Management, this product could be used as a step towards hedge fund investing, particularly for those with self-invested personal pensions or small self-administered schemes for whom the usually high minimum investment levels of hedge fund products are prohibitive.