Aim: Growth by taking long positions in US and European securities, synthetic short positions using derivatives and cash
Minimum investment: Lump sum £1,000, monthly £100
Investment split: 100% in US and European securities, derivatives and cash
Isa link: Yes
Charges: Initial 4.25%, annual 1.5%
Commission: Initial 4%, renewal 0.5%
Tel: 0800 727 720
The JPM Highbridge statistical market neutral fund is an UK Oeic version of the firm’s offshore fund of the same name. It is managed by Highbridge Capital Management, a specialist in statistical arbitrage strategies. Statistical arbitrage strategies aim to benefit from differences in the price between stocks through long and short selling, based on a range of factors that are fed into a computer system created by the fund manager.
Highbridge’s statistical arbitrage team will focus on mispricing in US and European securities, holding offsetting long and short positions to minimise the impact of market movements and sector swings. Long positions will be taken directly or indirectly using derivatives but short positions can only be made using derivatives under the fund’s Ucits III structure.
Hargreaves Lansdown Ben Yearsley feels that this is an interesting addition to the absolute return market as the manager already has a longstanding track record in managing money in this style. “This new launch is just the Oeic launch of an existing fund. Absolute return funds have had a bit of their gloss taken away in the last year or so as many have failed to deliver anything like their performance objectives of high single digit returns. However, on the flipside, the majority have not lost money in volatile market conditions, therefore I suppose the jury is still out on absolute return as a sector,” says Yearsley.
Yearsley observes that even JPMorgan’s original offshore fund of the same name is flat, or even down, over the last 18 months or so. Expanding on this point he says: “You have to bear in mind that interest rates are virtually zero, but this still is not an enticing return to make investors buy the fund. In addition to lack of return, there is also a performance fee on top of the annual charge.”
One positive for Yearsley is at least the annual charge 1.5 per cent, rather than 2 per cent with a 20 per cent performance fee. “However as discussed many times before, performance fees over Libor, which this one is, should be easy to achieve at the current time. The other issue with this fund apart from the charging is what exactly does it do? Some absolute return funds are very easy to understand and others are more difficult. If you , as an adviser, do not understand the fund, should you really be recommending it to your clients? I question whether you should. However what it does do is give you something different to many of the other absolute return funds,” says Yearsley.
Summarising what he sees as the potential drawbacks of the fund, Yearsley says: “I do not like the charging structure and it is a very complex product. Specifically with the charging structure, I do not like the performance fee over Libor.”
Discussing the main competition for the fund Yearsley says: “I would imagine all of the existing absolute return funds will provide competition, notably Cazenove UK absolute target, BlackRock UK absolute alpha and probably things like Standard Life global absolute return strategies. But it is worth pointing out at this point that no two absolute return funds are identical.”
Summing up, Yearsley says: “I think it is good that a longstanding player in the absolute return market is launching an Oeic version of its fund. However I cannot see advisers rushing out to use this at the current time.”
Suitability to market: Average
Investment strategy: Average
Adviser remuneration: Average