Matrix Money Management has created a fund of hedge funds that has a low minimum investment of £10,000.
Many hedge fund investments are aimed mainly at institutional investors and require minimum investments of £100,000. The Matrix bastion fund was designed to make hedge funds more accessible to a wider range of investors and aims to deliver returns of between 8 and 10 per cent. Consequently, it invests in the Tremont market neutral fund, a fund of hedge funds that focuses only on lower-risk market neutral strategies.
The Tremont fund is managed in the US by Tremont Advisers, which also manages the underlying fund of the Matrix conservative approach strategy hedge fund of funds. The Tremont market neutral fund invests in hedge funds that operate strategies such as equity market neutral, event driven, fixed income arbitrage and convertible arbitrage.
Matrix says that although many retail investors think hedge funds are very risky, the meaning of hedge is to hedge out risk, with the intention of preserving capital and making positive returns in falling markets.
In the current climate of volatile stockmarkets, some investors who have seen their equity portfolios diminish in value may turn to hedge funds as a way of diversifying part their portfolio away from stockmarket risk.
However, this product is unlikely to suit all investors who can afford the £10,000 minimum because they will be swapping stockmarket risk for a different kind of risk. The fund of funds manager must take a view of the economic outlook then get the right blend of hedge fund strategies that will work successfully within that environment, which can be difficult.