Mellon Global Alternative Investments, the UK-based subsidiary of the US company Mellon Financial Corporation, has introduced the Mellon global alternative investment fund.
Domiciled in Dublin, the product is a fund of hedge funds that has been set up as an open-ended investment company (Oeic). It is aimed at offshore investors, as well as UK citizens, who are looking to add a growth fund to an existing portfolio of investments. The fund is also aimed at institutional investors.
The Oeic will be divided into two subfunds, each of which will contain between 10 and 15 funds. The first sub-fund is Mellon sanctuary. This will invest in a diversified portfolio of cautious hedge funds that have low volatility and which offer consistent returns.
The second sub-fund is the Mellon symmetry fund. This will concentrate on hedge funds that follow long/short investment strategies. These are when a fund manager hopes to protect against a rise or a fall in one area of the market by taking up an opposing position in another area of the market.
Managing the Oeic will be the responsibility of Derek Stewart and Scott MacDonald. Both joined Mellon from hedge fund company Liberty Armitage in October 2000. Stewart worked for Key Asset Management from 1994 to 1998 before joining Liberty Armitage.
The risks of hedge funds must be understood by the investor, as hedge fund managers are effectively trying to outguess the market. At the moment, many investors are in a cautious mood and are looking to invest in safer actively managed funds. However, over the medium term they may lose out on any chance of recovery if they are still in hedge funds when the upturn comes.
According to Standard & Poor's the Mellon tactical asset allocation fund is ranked 10 out of 149 funds, based on £1,000 invested on a bid-to-bid basis with gross income reinvested over one year to July 23, 2001.