The UK fund aims to provide positive returns regardless of market conditions by taking long positions in UK companies and synthetic short positions using equity related derivatives such as swaps and futures. It will provide retail investors with access to the long and short investment skills of Gartmore hedge fund manager Ben Wallace for the first time.
Wallace joined Gartmore in 2002 after five years at Deutsche Asset Management. He moved away from long only funds in 2005 to focus on absolute returns and has managed Gartmore’s AlphaGen Octanis hedge fund since launch.
Octanis has a strong bias towards FTSE 100 companies and blends core ideas with tactical opportunities. Since launch until the end of February, it returned 81.9 per cent, while the FTSE All Share index was down 11 per cent over the period.
Last year, when many hedge funds struggled, Octanis delivered 29.4 per cent while the FTSE All Share fell by 30 per cent. Gartmore says this illustrates the manager’s ability to use shorting techniques succesully, but points out that as the fund is not a hedge fund, it will not be able to short stocks directly so its performance may differ from AlphaGen Octanis.
Wallace will run the new fund on a bottom-up basis where positions are taken as a result of stock picking. Core holdings will provide the long-term strategic views of the manager, while short-term tactical plays will be used to enhance returns.
Absolute return funds are flavour of the month and the potential for positive returns regardless of market conditions should appeal to investors when equity markets are volatile.
However, this fund’s success depends on Wallace’s ability to use shorting techniques within the Ucits III framework, with less freedom than his hedge fund.