The fund aims to return at least 10-15 per cent a year in various market conditions. It is based on the Cayman-domiciled Samsara Europen hedge fund run by Ajay Gambhir and follow the firm’s US absolute alpha fund, launched last October. It will provide investors with access to Gambhir’s long/short equity skills within a European portfolio that has daily liquidity.
Gambhir joined RWC in 2007 from JPMorgan Asset Management, where he ran the UK Dynamic, Europe Dynamic and Europe Dynamic Long Short fund.
In the new fund, Gambhir and his team will focus on stockpicking, which is expected to provide the main source of return. They will take a value approach, looking at earnings and profit margins within companies as well as current stock prices. All investment decisions are designed to produce absolute returns, so investments tend to be made in direct securities rather than index futures.
Under the Ucits III rules, short positions cannot be made directly in stocks so fund managers create the same effect using derivatives. This is known as synthetic shorting. Gambhir and his team will use contracts for difference to create short positions without the need to own the underlying assets.
RWC says many Ucits III absolute return funds do not have track records and feels that the seven years’ experience under Gambhir’s belt will provide a comfort factor for investors because he has faced good and bad market conditions.
Some managers that are used to running hedge funds out of Cayman and similar offshore jurisdictions may find it difficult to reproduce performance within the constraints if Ucits III. However, RWC says the Ucits III rules will not pose any problems for Gambhir because his investment style does not rely heavily on illiquid securities and leverage.