Liontrust changes plan for new hedge

Liontrust has revised plans to create a new hedge fund for Jeremy Lang. Fund Strategy revealed on September 10 (page 7) the group was planning to create a fund for Lang next year, two-and-a-half years after the closure of the Liontrust Absolute Return fund.

However, according to Liontrust, Lang (pictured) is too busy with management duties and instead William Pattisson is developing a UK hedge fund, which will be launched next year.

The day-to-day manager of the fund, which has yet to be named, will be Ben Fitchew. Fitchew has been at Liontrust for about five years and was previously based in the group’s fund manager analyst department.

In this team of three, he provided quantitative back-up for Liontrust’s fund managers. He works alongside Lang and Pattision on the fund managers’ desk.

Jonathan Harbottle, marketing director at Liontrust, says: “Jeremy, William and Ben all work on the same desk so there is a large amount of cross-fertilisation in the stock selection process.”

Harbottle says while Fitchew will manage the new hedge fund, the portfolio will be based on a mixture of Pattisson’s large cap investment process employed on his £32m First Large Cap fund and Lang’s value process, used on First Income.

In February 2005 Lang’s Absolute Return fund closed, only two-and-a-half years after its launch in September 2002. In that time the hedge fund fell 19p in price from 100p to 81p.

Designed as a mixture of the equity income and growth processes used by Lang, it was his short positions that hurt the fund’s performance. According to Harbottle the portfolio suffered because an “unusual” amount of corporate activity pushed up the prices of the stocks in which the fund held short positions.

Harbottle says Lang’s experience has taught them more about shorting techniques.

Indeed, Harbottle adds the group is not ruling out the possibility of launching a 130/30 fund. He says: “We are more likely to launch a European 130/30 fund than a UK fund and this would be some time next year. However, we will only do it there is client demand for it.”