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Julian Gibbs

There are very few sensible ways in which investors can hope to receive a return of over 10 per cent a year with capital security. Probably the most innovative and exciting product I have come across recently which should achieve this target is the Close Man hedge fund, which is targeting absolute returns of between 13 to 15 per cent a year net of all fees and with full return of capital after eight-and-a-half years.

The Close Man hedge fund is designed to give investors exposure to a wide range of hedge fund strategies and managers. This should provide valuable diversification benefits and significantly increase the financial return compared with a traditional portfolio.

Management of the fund is crucial and Man Group has excellent credentials. Man is part of the FTSE 100 index and manages £21bn of assets. It has launched around 400 hedge fund products and its multi-strategy guaranteed limited fund has outperformed the CSFB hedge fund Index by a substantial margin.

It should be remembered that hedge funds are an ideal way to achieve returns which are not dependent on the direction of equity or bond markets. They can make money in both falling and rising stockmarkets.

The capital guarantee bond issued by Royal Bank of Scotland should ensure the return of the initial investment at maturity. Unlike many other structured products, the bond can be redeemed each quarter at its net asset value.

The returns are taxed as capital gains, which will be subject to substantial taper relief and so give potential returns of over 10 per cent a year net of tax, even to higher-rate taxpayers, if the fund is held for eight-and-ahalf years.

This is certainly a fund that every big investor should consider.


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