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New spiel or new deal
April 2003
There is nothing that excites marketeers like
a new concept to market. Nigel Davies asks what qualities Investec’s
new hedge fund of funds has beyond spin
‘Multi-manager’, ‘fettered fund of funds’
and ‘unfettered fund of funds’ are just some of the marketing
words that have been buzzing around the asset management industry
for the past couple of years, with all the big boys launching some
such product.
Investec, joined the party last year by offering a feeder to the established
Olympia Capital Management Fund, a hedge fund of funds, run out of
Paris.
Now, the asset manager is offering a second tranche of investment
into the fund, so some investors who are sold on the concept of ‘absolute’
returns will be wondering if this fund can offer them what they desperately
need: consistently strong growth in good years and bad.
The underlying Olympia Capital Management Ltd fund, a specialist hedge
fund of funds manager, aims to achieve returns of between 5 per cent
and 8 per cent in excess of US Dollar cash returns over rolling 3
year periods with relatively low volatility.
The first tranche raised over $180m after its launch in June 2001
and the second, it is expected, will raise even more. Around 60 per
cent of this money was from Investec’s home market in South
Africa, but this time more UK investors will be targeted to join up.
Although the fund is registered on the Irish Stock Exchange it is
an unregulated fund and as such cannot advertise to private clients.
The fund’s returns, although impressive in difficult in equities
markets, have struggled to meet its objectives. In 2002, it returned
3.7 per cent against the HFRI Hedge Fund if Funds Index rising 1.1
per cent and the average offshore US Dollar money market fund rising
1.2 per cent.
Yvonne Leung, Portfolio Management Director at Towry Law, says the
fund is hard to evaluate given its limited track record and experience
in alternative investment, but notes that in 2001 and 2002 it has
not been able to meet its investment objectives.
This isn’t quite true – although it probably will be -
given that the fund can only be fairly judged over a rolling three
year period. Nor is it entirely correct to deny a lengthy track record,
given that Olympia, the underlying manager, has been around for over
a decade.
David Aird, joint managing director of Investec Fund Managers says:
“Series I has seen testing times, but has outperformed bond
and equity markets and passed the first objective of not losing any
money with flying colours.”
Olympia Capital, as manager, has a good track record as a fund of
funds manager, being one of the most experienced alongside GAM. As
Aird notes: “There are not too many companies with over 10 years
experience in the field, Olympia is one of the grandaddy’s of
the industry.”
Investec’s Series I & II work as feeder funds, working to
produce the same results as its fund manager’s flagship Olympia
Star Series, which has produced an annualized return of 12.47 per
cent after all fees in the last ten years and seen volatility at 7
per cent annually.
The new tranche is seen by Investec as a response to a growth in demand
for this type of fund. It will invest over a diverse portfolio whose
largest strategic investments in its model portfolio include global
macro markets at 23.7 per cent and fixed income and convertible arbitrage
at 12.9 per cent and 11.8 per cent respectively. The fund has monthly
liquidity.
Series II will, however, have the ability to invest in “smaller,
exciting newer managers” unlike its sister fund.
An added bonus for the fund over its rivals is that there is no annual
performance fee. There is an initial charge though of 5 per cent (try
to negotiate this with your broker) along with a management fee of
2.5 per cent and administrative fee of 0.5 per cent.
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