Close Fund Management and Man Investments have teamed up for a second time to offer the Close Man Guaranteed Hedge Fund II.
This capital-protected fund of hedge funds is available to investors with a minimum of £10,000 and aims to provide a return of between 11 per cent and 13 per cent a year during the investment term of eight years and six months. Capital will be returned at the end of the term regardless of the performance of the underlying investments.
The fund invests in a range of hedge funds selected by Man Global Strategies, an investment division of Man Investments. The hedge fund strategies used in the portfolio include arbitrage, equity hedge, long & short equities, managed futures and multi-style strategies which combine a range of strategies. The merit of the multi-manager, multi-strategy style is diversification, so one manager or style can compensate another that is not doing so well
The Close fund will blend different managers and styles to create an acceptable level of risk for the level of return it is seeking. High leverage may be used to ensure the target returns are met and the underlying funds may also be highly geared. This can be very risky but the presence of the capital guarantee may mitigate the risk in a way that conventional hedge fund of funds cannot.
The introduction of this issue coincides with the second issue of the Matrix ascension plan, a capital-protected hedge fund which has a shorter term of seven years. Although the capital protection runs along similar lines, investors with Matrix get 100 per cent of the growth in the Winton trading strategies fund, which invests globally in futures.
Some investors may prefer the Close Man product because the target returns give investors an idea of what they will be getting. Investors in the Matrix product face greater uncertainty as they do not know how the underlying fund is going to perform. In addition, the Close Man product is more diverse, but the Matrix product may outperform if economic conditions favour the managed futures strategy.