Platinum Capital Management has established the Platinum all weather fund which aims to make a profit for investors by exploring price differences between the stocks and options within the same companies.
As the name suggests, this hedge fund has the ability to perform well regardless of stockmarket conditions. It has a target return of between 10 per cent and 14 per cent a year and is available in US dollars and euros. It is available to investors with a minimum investment of £100,000 and those with smaller investments of at least £25,000 can access it through the Platinum portfolio bond.
The fund applies a long and short equity strategy to the largest 50 to 100 US companies listed on the S&P 500 index. These companies were chosen because stocks on the S&P 500 index are highly liquid, enabling the hedge fund manager to dip in and out of the market whenever suitable opportunities arise.
The hedge fund manager will look at the companies on a bottom-up basis assessing factors such as cash flow, but paying particular attention to the prices of stocks and options within each company. As the stockmarket and the options market trade independently, the stock price could be higher or lower than the option price.
Price differentials could prompt the fund manager to buy on one market and sell on another to make a profit. However, the fund manager can only go short on the options side, not in relation to the underlying stocks and this is designed to lower the risks.
The fund's selling point is likely to e its ability to produce double digit returns within the current climate of uncertainty, but it is likely to suit only high-net-worth and institutional clients who are prepared for higher than average risks.