At a time when banks worldwide are being recapitalised, a fund management group has decided to launch a specialist financial fund, which it says will target undervalued shares.
Dominion Fund Management, a Guernsey-based group, launched the Dominion Global Finance fund two weeks ago. The fund, a Ucits compliant, Guernsey-based Oeic, is a professional investor fund with a minimum investment of £25,000.
However, Alex Bell, the chief executive officer of Dominion, says, given the significant level of demand received already, “it is inevitable” that the group will take it to the British retail market at some stage soon.
“We have been looking at this fund for close to six months,” says Bell. “We are not trying to call the bottom of the market but it has become obvious that as the credit crisis has spread the valuations on all [financial] stocks have dropped, even those with solid business models which should not have been adversely affected.”
The fund is managed by an investment committee headed by Arjen Ros. Ros joined Dominion in 2004 from Merrill Lynch, where he was head of equity research. Dominion Investment Analytics acts as the investment adviser, a role in which it conducts the stock research and generates the buy, sell and hold recommendations.
The fund invests across the global banking sector, having the ability to hold insurance groups, fund management groups or specialist finance stocks.
Bell says that initially the portfolio will hold 40 companies, the top three of which are Aegon, Allianz and Allied Irish Banks. Initially 52.5% of the fund will be held in banks, 20% in insurance companies and 27.5% in diversified financial companies.
In terms of geography, up to 75% of the portfolio will be concentrated on large-cap opportunities in Europe, America and Asia, but it can hold up to 25% in developed markets.
Ben Yearsley, senior investment manager at Hargreaves, says that while he has not seen the details of the fund, the timing of launching is a good idea.
“If you can build a track record from what could be close to the bottom of the market, your performance could look fantastic in a few years’ time,” he says.
“The caveat however is that in the retail world I would not expect they will raise much money in this environment.”