Old Mutual Asset Managers has introduced an offshore hedge fund that is available to high-net-worth UK expatriates.
The Old Mutual global equity market neutral fund is designed to meet demands for a hedge fund from investors in South Africa, where the company was founded. It is not available in the UK, but it is being marketed in other parts of Europe.
The fund is denominated in dollars and its high minimum investment of $100,000 emphasises that it is intended for wealthier clients. It aims for low volatility and high returns whatever the market conditions by using long and short selling.
Long and short selling means returns are not dependent on the movement of stockmarkets, but are dependent on the fund manager's analysis and stockpicking techniques. The fund manager will buy stocks that look set to rise in value, like managers of unit trusts and Oeics, which is called going long. But hedge funds are also allowed to sell short, which involves borrowing shares for a fee, selling them and buying them back when the price has fallen.
However, hedge fund investors must have faith in the fund manager's ability to make the right choices at the right time and it is more likely that interest will come from institutional investors and pension funds than wealthy expatriates because of the risks involved.