Like the UK absolute return fund, the European absolute return fund aims to achieve a positive return in all market conditions and was launched to meet adviser demand for this type of product.
Fund managers Gavin Lauder and Ian King will take full advantage of the ability to invest in derivatives to take synthetic short positions under the Ucits III rules.
Senior portfolio manager Lauder joined Legal & General Investmnet Management in 2007 from BlueBay Asset Management, where he was a global equities analyst. He has also worked as portfolio manager at UBS O’Connor and an analyst at SG Warburg – now part of UBS – and Goldman Sachs.
Head of active European equities King is a hedge fund specialist who also joined L&G in 2007. He previously helped to establish the KDR Europe hedge fund and spent 10 years at American Express Asset Management.
Lauder and King will use top-down research to determine country and sector allocation, then conduct stock-specific research to construct a portfolio of 20 to 26 positions. They will invest long, like a conventional European equity fund, in companies with share prices that they exoect to increase. Short positions will be taken, through derivatives, in companies that appear to be deteriorating so that the fund does not depend only on rising markets to generate returns.
All currency exposure will be hedged back into sterling on a daily basis, to reduce the impact of exchange rate fluctuations.
IFA Hargreaves Lansdown says that given its strategy, the fund may underperform in a sharply rising market, but should outperform in a falling market. However, it could face competition from Gartmore, Jupiter and Liontrust.