Schroders Private Bank has added a more aggressive hedge fund of funds to its Schroder alternative investment funds (SAIF) range.
SAIF Blue Mountain aims for returns of between 10 per cent and 15 per cent a year by investing in eight to 12 hedge funds on a global basis. In contrast, SAIF Blue Sea produces a lower target returns of between 6 per cent and 9 per cent a year. SAIF Blue Star seeks returns in line with equities with lower volatility and is designed to diversify portfolios rather than enhancing returns.
SAIF Blue Mountain will invest in the more volatile funds within the global hedge fund universe that use convertible, statistical and fixed-income arbitrage strategies. The funds chosen for the portfolio, which is small compared with the other funds in the SAIF range, are also likely to trade more often.
When selecting funds for the portfolio, a team of seven analysts will screen the hedge fund universe down to a manageable number then analyse the remaining funds. The portfolio construction and investment process behind each hedge fund will be examined in detail. Visits to each company within the portfolio will take place two or three times a year as Schroders believes it is important to visit them in their own environment to see how they work.
SAIF Blue Mountain would appeal to high-net-worth clients who are more interested in achieving high returns in all economic conditions than preserving capital. Although hedge funds have become more popular since the bear market because they have the ability to make money in falling markets, some investors may find the returns are not as spectacular as they assumed.
This fund of fund's focus on arbitrage strategies may suit current market conditions, but other strategies may be better performers if market conditions change.