View more on these topics

Star fund managers at the cutting hedge

After the recent exodus of star fund managers to smaller hedge fund boutiques, it was just a matter of time before the big investment houses found a way of making up for their losses.

The first appears to be Henderson which, with the launch of its new fund of hedge funds, is looking to tap into the UK&#39s star fund managers.

The fund&#39s aim is to give retail investors access to the big name fund managers which have quit the mainstream retail arena to run smaller hedge funds.

Once it is up and running next month, the portfolio promises to comprise a dream team of managers, which have otherwise been inaccessible to retail investors with less than $1m to invest.

So far, Henderson has mentioned the likes of former Barings European manager Crispin Odey and former Jupiter director Alan Miller as likely holdings in the new fund but it will be spoilt for choice as it picks the rest.

Deutsche&#39s Clare Flynn, Scottish Equitable&#39s Neil Smeaton, M&G&#39s Andrew Gibbs, Invesco&#39s Mike Lindsell and Merrill Lynch&#39s Peter Davies are all well respected managers who have left to run hedge funds in the past year.

If groups such as Liontrust are correct, the UK is set to see a proliferation of boutiques in the next few years as star managers become frustrated with running increasingly big funds inside the bigger houses.

The new fund is to be managed by Henderson director John Husselbee, who heads the firm&#39s multi-manager division. He says Henderson has been looking at launching this product for months but felt now was the best time in terms of UK sentiment towards hedge funds and market conditions.

He says: “I think the UK hedge fund market is in its infancy. It is well established in Europe and a mature market in the US and the UK is set to follow. For the UK, this is a new asset class which has the ability to protect investors from the downside of equity markets. It is also an industry which has attracted some of the most talented managers.”

Although Henderson&#39s dream team fund is arguably the most interesting offering so far, it is by no means the first or only hedge fund product to be targeted at the retail market. Matrix&#39s Tremont fund of hedge funds started the ball rolling while Deutsche&#39s Xavex, launched last month, became one of the first hedge fund products to qualify for use within an Isa.

Deutsche Bank director of investment funds research Martin Fothergill says: “We started a fund of hedge funds product in Europe, which was the initial inspiration for our UK fund.

It raised (£1.1bn) 1.8bn euros in four weeks, which was a fairly good incentive to try launching over here.

“There are also some spe-cific reasons why now is a good time for a product like this. Last year, retail investors experienced a lot of volatility in equity markets. The great beauty of hedge funds is how they perform in volatile markets.”

As hedge fund fever starts to spread, few fund managers are not considering a move into the market.

Last month, Morley announced plans for a split-capital investment trust which will invest part of its portfolio in the hedge fund sector.

Jupiter&#39s recruitment of the Lazard multi-manager team, led by John Chatfield-Roberts, was also inspired by plans to move into hedge funds.

There is, however, a degree of nervous sentiment among some IFAs, which is still unsure of the safety of hedge funds. Many investors still find it hard not to associate any mention of hedge funds with high-risk global macro funds such as George Soros&#39 long term capital management fund. Others are concerned that hedge funds&#39 lack of regulation and transparency make it difficult to assess their risk.

Henderson says it will insist on full disclosure from all the hedge funds held in its portfolio. But it will not insist on the managers making their transactions public, leaving the investor to put its faith in Henderson.

This week, marketing firm Sway held a hedge fund conference in London for the top 50 UK IFAs in a bid to break down some of the myths over hedge funds. Most IFAs are now keen to at least understand the main concepts and generally it seems they are starting to give the sector greater consideration.

As products which provide an element of protection to the downside of volatile markets, they are simply another tool which the IFA can use to build clients&#39 portfolios.

Plan Invest joint managing director Michael Owen has been wary of hedge funds in the past but is starting to open up to the idea of using them.

He says: “I am much warmer to hedge funds now and I think we will be using them before the year is out.”

Recommended

Will Chancellor lick stamp duty?

Autif would like to see Chancellor Gordon Brown relax stamp duty on share transactions within funds of funds. This type of savings vehicle is hit twice by the levy, which does not make any sense. Both the main fund and the funds it invests in are taxed the 0.5 per cent duty when purchases take […]

Top of the non-conform

Despite moves by the Council of Mortgage Lenders and the ABI to promote mortgage payment protection insurance take-up in the last year, there is still debate over the benefit of this protection. Latest figures from the CML show there is an increasing trend of people taking out cover to protect themselves. In the first six […]

Pink drops in with its new parachute mortgage

Pink Home Loans is bailing into the adverse credit market with its parachute mortgage.The mortgage is aimed at people who are looking to buy a home but who either have a history of bad credit, or who have a number of county court judgements (CCJs) against them.The mortgages rate is based around the London interbank […]

FSA bans commission to IFAs with tree restriction

The FSA is forcing life offices to block IFA commission on stakeholder if their call centre staff take clients through decision trees, potentially leaving IFAs unpaid for hours of work. The move means even if a commission-based IFA has advised an employer, performed a worksite presentation, distributed marketing material and convinced dozens to take the […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com