Man Investments has created Man Global Strategies diversified series 2, a capital-protected fund of hedge funds that provides income or growth.
This product provides access to the Man Global Strategies diversified portfolio through capital bonds and income bonds in three different currencies - Euros, dollars and Swiss francs. Man Global Strategies constructs and manages hedge fund portfolios for Man Investments and other international institutions including banks. The investment team have been constructing multi-strategy portfolios for Man Investment since 1996 when the Man-IP 220 product was developed.
The underlying portfolio initially has around 33 per cent into arbitrage strategies, 30 per cent into managed futures while the rest of the fund is made up of directional, equity hedge and long/short equities. A target return of 13 to 15 per cent a year is expected using the dollar and euro-denominated bonds. The Swiss franc bonds have a target yield of 12 to 14 per cent.
Growth investors will get all their capital back at the end of the term in 2017 and will benefit from a profit lock-in feature. This means that the guarantee can increase beyond the capital depending on the performance of the underlying portfolio.
Income investors also get their original capital back at maturity and are guaranteed 2.5 per cent income a year for the first two years, After that, a variable rate of income will be paid which depends on the performance of the underlying portfolio.
Investors can redeem their bonds monthly but if they do before July 31, 2010 they will pay a redemption fee. This decreases from 4 per cent which decrease from 4 per cent of the net asset value until July 31, 2006 to 1 per cent on the same date in 2010. After that investors can cash in their investment without penalty.
This product offers investors a very diverse hedge fund portfolio managed by experienced professionals with the added benefit of capital protection. However, it may be difficult for sophisticated investors to find out exactly where and how their money is being invested as the managers of the underlying investments may be unwilling to disclose the workings of their funds.