Sophisticated high-net worth clients are being targeted by the Frank Russell Company to invest in the alternative strategies fund.
This offshore open-ended investment company (Oeic) aims to produce returns of between 10 and 15 per cent a year. It invests in hedge fund strategies such as event driven, market neutral arbitrage and long and short selling.
Event driven strategies take advantage of circumstances such as stockmarket flotations and takeover bids and market neutral arbitrage involves trading between different securities issued by the same company. Long and short selling is where overvalued securities are sold by the fund manager, who intends to buy them back at a lower price.
Global stockmarkets tend to follow the same direction and as a hedge fund, the alternative strategies fund is independent from this movement, which may be an advantage given recent volatility. Some hedge fund strategies are not as volatile as stockmarket investments, but this does not mean they are low risk.
The alternative strategies fund attempts to reduce risk by using 14 different managers who use different investment strategies.
However, investors must be prepared to take a gamble on the fund manager making the right choice to buy or sell securities at the right time.