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F&C’s 130/30 fund will target purely equities

F&C has plans to launch what it believes will be the first 130/30 fund to invest purely in UK equities.

The F&C UK enhanced alpha portfolio is set to be launched in August under the management of Luke Newman and Makis Kaketsis.

The fund will hold 40-60 long positions and 10-15 short, with Newman and Kaketsis applying the “lifecycle app-roach” they use on their special situations and UK dyn-amic funds to try and invest in companies which are in a restructuring phase.

The fund will be 100 per cent invested in the equity market on the long side, with 30 per cent shorted of stocks that the duo believe are overvalued to finance an additional 30 per cent of added exposure to high-conviction stocks.

Although the portfolio is initially a 130/30 vehicle, listing particulars will also allow the managers the flexibility to move to a 150/50 structure.

Head of UK equities Richard Wilson says: “As long-only fund managers, perhaps the greatest constraint to generating excess return is the inability to short. A 130/30 fund, utilising the wider powers available under Ucits III, removes that constraint and allow us to make money on our negative as well as positive positions.

“Our long only positions still need to be able to outperform the benchmark but by combining an element of netting off between the long and short positions, the risk return profile is also more favourable.”

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