F&C fund employs hedge techniques

F&C has launched an absolute return fund that aims for a return of 2-4% over short-term money market rates, net of all costs.

F&C has launched an absolute return fund that aims for a return of 2-4% over short-term money market rates, net of all costs.

The fund invests in a portfolio of derivatives focused on developed markets, predominantly Europe and Amer- ica, and has a bias to larger-cap indices.

Launched last week, the F&C Active Return fund is co-managed by Stephen Crewe and Chris Childs of F&C’s alternative investments team.

The new fund uses some of the derivatives investment strategies employed on products already managed by the team, including a hedge fund, and will be supported by an independent risk system.

The alternative investments team has worked together managing derivative investment strategies for 13 years, blending a quantitative framework with qualitative research.

The underlying philosophy of the Active Return fund is to concentrate on sources of risk premium that have been proved to exist and are believed likely to persist in the future.

Jason Hollands (pictured), head of communications at F&C, says the fund launch was driven by investor demand.

“Our discretionary clients were looking for a product that was lowly correlated to equity and bond markets,” he says.

“A number of them had been following a hedge fund product managed by the team. They wanted this strategy in a fund product rather than a hedge fund.

“We test-marketed it during September and the team decided they wanted to launch it now because they feel there are opportunities there.”

The Active Return fund, which was launched with €40m (£31.8m) of seed money, has both sterling and euro share classes. It has yet to be registered for marketing, so is currently available through private placement only. Its initial charges are up to 5% and the annual management fee for retail investors will be 1.5%.