Castlestone Management plans to launch a Defensive Equity fund, which mixes hedge funds and equity indices. It is designed to appeal to investors who expect markets to recover but are not sure when.
Jerry Devlin, the global head of sales at the group, says the fund will also appeal to those who wish to stay with a familiar asset class such as equities, but who also want to access the diversification and returns offered by managed futures hedge funds.
He adds: “We do not think anyone else is offering this type of structure to investors and we are already familiar with the principles and use the capability in our other funds. Managed futures hedge funds are able to go long or short equities, bonds and other asset classes and have shown they can provide consistent positive returns over the past few years.”
Before going ahead with a launch Castlestone will test market appetite for such a product in early 2009. It plans to domicile the open-ended fund in the British Virgin Islands, which British investors cannot directly access. However, Devlin says they will be able to gain exposure through offshore bond links offered by groups such as Friends Provident and Skandia.
Asset allocation is likely to be 40% spread across equity indices in the developed markets and 60% in five managed futures hedge funds.