View more on these topics

Henderson expands its horizons

Henderson Global Investors is launching the Horizon Pan-European Alpha Plus fund, which will bridge the gap between long-only funds and hedge funds.

The wider investment powers of Ucits III are at the heart of this fund’s investment process. It has a different approach to many Ucits II funds, which use these powers as tools to dip in and out of when appropriate. This fund will aim to outperform the MSCI Europe index by 3 per cent with a maximum deviation from the index of 3 per cent.

European companies may be listed on more than one stock exchange at different valuations and may issue different types of shares, which have different prices. This type of situation throws up potential pricing anomalies that the Henderson fund can exploit, as will events such as takeovers and changes to equity indices.

Broadly speaking, the Henderson fund will look at related securities to determine which ones to hold and which to short. Conventional short selling involves borrowing a stock that looks likely to fall in price, selling it, and buying it back at a lower price to generate a profit. However, Ucits III funds are not allowed to physically short sell stocks the way hedge funds can, so ‘synthetic’ positions are created by shorting derivatives.

For example, pair trades – where long and short positions are taken within the same sector – can be used to ensure there is a potential to profit even if the sector performs badly.

The Henderson fund uses four strategies – relative value, liquidity, event driven and fundamental analysis – to uncover price anomalies. The manager will invest where the opportunities to go long and short are, regardless of whether the markets are likely to go up or down.

While this approach means the manager does not risk making the wrong asset allocation calls in terms of country and sector, the main risk would be shorting the wrong stocks, particularly if the manager has limited experience in derivatives.

However, Elms – who joined Henderson is 2002 – is an experienced hedge fund manager and traded in derivatives at his previous employers, Melbourne-based Portfolio Partners and County NatWest Investment Management.

Recommended

A question of Treasury competence

Referring to your pre-Budget report supplement, on the front page, you quote an anonymous Treasury spokesman as saying: “When you introduce a system of rules, you make assumptions about how that system will work in practice. If it works differently in practice, then you revise those rules.” Perhaps it should be pointed out to the […]

St James’s Place chief exec quits

St James’s Place chief executive Mark Lund is leaving the Group in what SJP has called a joint agreement.Lund joined the Group three years ago and became chief executive in September 2004. He says he is leaving to seek a new challenge.The search for a new chief executive is expected to start shortly but in […]

Number of FTB’s lowest for 26 years

The number of first-time buyers is estimated to have fallen by 7 per cent from 340,000 in 2005 to 315,000 in 2006 which is the lowest annual total since 1980.According to research from Halifax, the annual number of first time buyers has fallen by 37 per cent since 1997 when there were 503,000 FTBs.The research […]

Hazard warnings

Readers may remember a scene from Indiana Jones and the Temple of Doom in which a huge boulder comes rolling down the cave towards the hero.IFAs may feel as if their careers follow a similar pattern, dodging every hazard the FSA can roll at them. But maybe it is the FSA that will have some […]

InFocus - thumbnail

In Focus — February 2015

Jelf Employee Benefits looks at the issue of paying anaesthetist fees when the patient had no chance to discuss or agree to them prior to care; and provides recommendations for avoiding this scenario.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment