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Liontrust reveals Euro absolute return details

Liontrust has announced that its European long/short absolute return retail fund will be launched at the end of June, subject to Financial Services Authority (FSA) approval.

The Liontrust European Absolute Return fund, managed by Gary West and James Inglis-Jones, will use the same investment strategy as their existing long-only Continental Europe fund.

Called the Cashflow Solution, the process aims to exploit errors in profit margin forecasts and looks at cash-flows to predict which firms will beat the markets expectations.

The fund will be run broadly along the same lines as the Liontrust European Long/Short hedge fund which was launched in 2006. However, as the new fund will be structured as a Ucits III enabled UK unit trust, it will use contracts for difference (CFDs) to short positions.

For liquidity purposes the retail fund will be limited to investing in companies with a market cap above 1 billion (875m), whereas the hedge fund can go down to 250m.

Inglis-Jones says the hedge fund currently has more short positions than long, with the average portfolio consisting of 50 shorts and 30-40 longs.

Meanwhile, compared with the hedge funds target return of 15%, the retail fund will target an annual 10-12% return.

The fund will carry a 5% initial charge, a 1.5% annual management fee and minimum investment will be 1,000. The fund will also carry a 20% performance fee subject to any outperformance of a three month London interbank offered rate (Libor) cash hurdle, with a high watermark.

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Liontrust plans European absolute return fund


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