The F&C active return fund will target returns of 2-4 per cent per annum over short term money market rates, net of all costs, with low volatility.
F&C says the fund will be attractive to investors seeking alternatives to traditional and volatile asset classes, such as equity and bonds, which have exhibited increased levels of correlation in recent years.
The new fund will be co-managed by Stephen Crewe and Chris Childs within F&C’s alternative investments team and will seek to utilise derivative investment strategies including a hedge fund employed on existing products.
The fund will use market neutral, volatility trading and second order trade strategies to exploit market pricing anomalies. It will also use non-equity sub-strategies such as portfolio hedging and volatility trading in credit and currencies.
The fund is expected to have a very high weighting in excess of 90 per cent in liquid investments such as cash, deposits and floating rate notes.
Derivatives in the portfolio will focus on developed market equities, predominantly in Europe and the US, with emphasis on larger cap indices where liquidity is greatest even in times of market stress.
The fund will feature daily single pricing, a simple fee structure and daily liquidity through a Luxembourg domiciled Ucits III Sicav fund structure and will be available in euro share classes for retail investors.
Initial charges for the fund are up to 5 per cent with an annual management charge of 1.5 per cent on retail shares.