Man Investment Products has introduced Man AP strategic series 2, a Bermuda-based capital guaranteed bond that invests in managed futures and hedge funds.
Like the first series of the product, Man AP strategic series 2 is available in euros or dollars or investors can choose a combination of the two. The target return is between 14 per cent and 16 per cent and investors are guaranteed at least the return of their original capital by 2013. If the bonds perform well, the guarantee will increase accordingly.
The bond will invest mainly in managed futures through the Man-AHL institutional portfolio, with a smaller amount invested in hedge funds. Managed futures invest in futures contracts, which fix prices for the trading of goods such as precious metals and oil, to be delivered on a specified date in the future.
The bond will also invest in equity hedge and arbitrage hedge fund strategies. Equity hedge involves long and short selling, while arbitrage involves buying convertible bonds and selling the underlying investments short.
Futures and hedge funds can make money for investors irrespective of the direction of bond and equity markets, and this could be attractive in times of uncertainty. In addition, this product protects the original capital, which positions it at the lower end of thus high-risk area of investment.
Interest could come from pension funds, self-invested personal pensions and sophisticated high-net-worth investors who want the potential for higher returns than equities and stocks can deliver, but who understand the risks that not following those markets will involve.