Man Investment Products has unveiled Man multi-strategy series 4, a fund of hedge funds that is structured as a capital guaranteed bond.
This product differs from previous products in the Man multi-strategy series in that it guarantees investors a return of at least 120 per cent of their original investment. A profit lock-in feature means that if the bond performs well, the guarantee will increase. The target return is around 15 per cent a year and investors can choose between dollar-denominated bonds, euro-denominated bonds or a mixture of the two.
Man multi-strategy series 4 will invest in a range of hedge funds from different managers that use different strategies. Long and short selling is the most popular strategy, but event-driven strategies, arbitrage and managed futures will also be used. The aim is to blend the strategies so that the product meets its target for growth in all stockmarket conditions, with an emphasis on low volatility.
No hedge fund strategy performs well in all market conditions. The CSFB Tremont hedge fund index shows that between January and September 2002, long and short equity produced a return of -2.98 per cent, while managed futures produced a return of 20.63 per cent. Unlike products which rely on a single strategy, the weightings in the Man product can be tilted towards the most suitable strategies as economic conditions change.
The capital guarantee makes this fund less risky than some hedge fund products, but it is still part of a high-risk investment area that is of interest mainly to institutions and sophisticated high-net-worth clients.