io Investors, a sister company of consulting actuaries Punter Southall, has unveiled its second hedge fund of funds.
The company specialises in multi-manager funds and introduced its first fund of hedge funds in October 2001. This was designed as a lower risk hedge fund, but the new product, the defensive equity fund, is a step above this on the risk ladder.
The fund is based in Dublin and aims to produce returns that reflect the upside of rising stockmarkets, while also delivering positive returns over time when stockmarkets are falling.
The portfolio currently consists of nine hedge funds which use a long and short equity strategy. The funds cover Europe, the US and Japan, but have no exposure to emerging markets. About two thirds of the funds in the portfolio are normally closed to new investors, but io Investors has negotiated terms allowing it to invest in these funds.
The product may appeal to high-net-worth clients and institutional investors who want to shield their capital from the volatility of equity markets, but still have the potential for capital growth if stockmarkets recover. The attraction of hedge funds is that they do not rise and fall in line with stockmarkets, so they may fill a niche for some investors who have been hit by badly performing equity funds.
The fund of hedge funds concept make this fund less risky than some funds, but as it relies only on one hedging strategy, it is not as diverse as it could be. Demand from retail investors may be limited as the minimum investment is very high.