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SEB opens ‘hedge fund lite’ funds to UK retail market

SEB Asset Management, the asset management arm of European financial services group Skandinaviska Enskilda Banken, has made its asset selection fund range available to UK retail investors.

The funds are not hedge funds in terms of their legal structure, but have the same goal of producing absolute returns and use similar strategies within a Ucits III framework. SEB Asset Management believes the funds combine the best features of hedge funds, such as the ability to go short, with the best features of regulated investment funds, including daily liquidity.

There are three funds in the range, each with a different risk and return objective. SEB asset selection defensive aims to produce an average return of 2 per cent above the risk free rate, defined as the three-month gilt rate, over a three to five year period after fees. It has an average volatility target of 5 per cent over the period.

SEB asset selection fund aims for an average return of 5 per cent above the risk-free rate on the same basis, while SEB asset selection opportunistic fund aims for an average of 10 per cent above the risk-free rate. The funds have respective volatility targets of 10 and 20 per cent.

All three funds will invest globally across equities, bonds, commodities and currencies using a computer-driven quant approach. Futures will be used to take short positions, as Ucits III funds cannot short securities directly.

SEB’s quant team says investing in illiquid securities was the reason for many hedge fund failures so it will invest only in the most liquid securities.

These funds could appeal to sophisticated investors who like the idea of hedge fund type investments with the benefits of regulation, liquidity and no minimum investment.

However, some advisers could adopt a wait and see attitude to the fund because SEB is not well known in the retail market.

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