This capital-protected fund of hedge funds is available through two bond classes that mature on August 30, 2019. Dollar denominated bonds have a target return of 13-16 per cent a year and euro-denominated bonds have a target return of 11-14 per cent a year.
The fund invests in the AHL institutional programme, Bayswater Asset Management’s global macro programme and four Man Global Strategies style portfolios.
AHL is a division of Man Investments and has a trading history of over 20 years. Its institutional programme uses managed futures to capture short to medium term trends in a range of global markets. It uses technical analysis based on historical data to identify opportunities to profit from price movement. It generally makes larger trades n a range of markets including stock indices, bonds, currencies, short-term interest rates and commodities.
AHL trades mainly in futures contracts and foreign exchange or metal forwards. Factors that determine asset allocations to sectors and markets include correlation between markets and sectors, expected returns trading costs and liquidity.
Like AHL, San Francisco-based Bayswater takes advantage of market inefficiencies but takes a longer-term global macro approach, It looks at interest rate levels and other economic data to determine whether bond, currency and equity markets are undervalued or overvalued. It then takes long and short positions in those markets. Trading is carried out through equity index futures, currency forwards, government bond futures and interest rate swaps.
Man Global Strategies is another division of Man Investments. Its style portfolios will diversify the strategies of AHL and Bayswater. The intention is to build a portfolio hat is not over-dependent on one manager or strategy.
There is a capital guarantee that is provided by Merrill Lynch International Bank to ensure investors come away with at least their original capital. There is also a profit lock-in feature that comes into play if the bond classes are 150 per cent exposed to the underlying assets and their net asset value increases by 10 per cent. This potentially increases the amount of the guarantee at maturity.
The diversity of strategy, asset class and region within this product gives it a chance to capture profits throughout the economic cycle, while the capital guarantee provides a degree of security. Some advisers may question whether a guarantee is needed on a product of this type, but as the bond shares are geared, investors may feel it is worth paying for.