Global Investment Advisers has established the GAIM market neutral fund, a tracker fund of hedge funds that invests in the top 15 to 20 hedge funds listed on the equity market neutral and convertible arbitrage sub-indices of the CSFB-Tremont Hedge Fund Index.
This fund is designed to meet demand from high-net-worth clients who are unhappy with long-only equity funds, which have suffered during a lean period on the stockmarket.
Market neutral strategies are where fund managers do not take directional bets on the market, but take sideways bets. They may go long on some stocks within a sector, while going short on others in that sector. Convertible arbitrage strategies work in a similar way, but take different positions on assets within the same company.
Unlike some hedge funds, this fund will provide investors with information on all the hedge funds it holds on a monthly basis. It may be of interest to wealthy clients who want the ability to make money in a way that is not dependant on a stockmarket recovery.
As a fund of hedge funds, it has the advantage of diversity and is lower risk than single hedge funds. However, this diversity does not extend to the strategies used. The CSFB Tremont Hedge Fund Index for July 2002 shows that equity market neutral strategies are performing better than others such as event-driven strategies. But if market conditions change, a fund that relies solely on these strategies could suffer.