Cazenove plans two absolute returns

Cazenove Capital Management has announced plans to launch two absolute return targeted funds this year. Robin Minter-Kemp, managing director of Cazenove Capital, says the funds will be headed by Tim Russell and Chris Rice, who both joined Cazenove from HSBC Asset Management in 2002, and will be launched in the second quarter.

Russell and Rice both manage Cayman Islands-domiciled hedge funds and Minter-Kemp says the new funds will use the particular skills taken from their experiences.

“The way they’ve managed them [the hedge funds] echoes what you can do with a Ucits III vehicle,” says Minter-Kemp.

He says the challenge with the new funds will be to allay investor cynicism regarding absolute return targets. “The big problem with absolute return funds in the retail market is their record,” he says.

“Without doubt there is a huge demand for this kind of product but a lot of funds have shown themselves wanting,” he adds.

He points to the BlackRock UK Absolute Alpha Fund as an example of how absolute return can prove to be a successful model.

The new funds will not be multi-asset but instead aim to hedge risk in much the same way as the BlackRock fund to ensure smooth returns irrespective of which way the market moves.

“BlackRock is effectively the prototype,” says Minter-Kemp.

The final details of the funds, including the minimum investment, are being worked out.

As reported in Fund Strategy last week, Morningstar lists 11 open-ended funds that aim to produce absolute returns above cash.

The London Interbank Offered Rate (Libor) gave returns of 4.8% in 2007, yet only four of the funds delivered a return of above 5%. Only one of the funds has a three-year track record, the Credit Suisse Target Return Fund. The 8.8% returns from the fund in the three years to January 7 were lower than those delivered by cash over the same period.

BlackRock’s fund, managed by Mark Lyttleton, had positive returns in every month of 2007.