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New Star raises USD95.2m for second Hedge ETS tranche

New Star Asset Management has raised an additional USD95.2m for a second tranche of Hedge ETS, a London-listed daily tradable security that provides access to performance representative of hedge funds as an asset class through investment exposure to the RBC Hedge 250 Index.

The second offering brings to around USD253m the total size of Hedge ETS, a Guernsey protected cell company launched last November, following the raising of USD150m in the initial offering. Money was raised from more than 20 countries including the UK, Spain, Switzerland, Hong Kong, Singapore, the Middle East and South America.

Says New Star director Ravi Anand: 'A variety of investors including institutional and clients of private wealth managers supported the issue. We continue to see considerable demand for alternatives from our clients, and further tranches of Hedge ETS will be offered to meet such demand.

'Hedge ETS offers a truly diversified pool of hedge funds selected on a non-discretionary basis. The diversification benefits of Hedge ETS are illustrated through its positive performance through the recent market turbulence.'

The RBC Hedge 250 is designed to be a representative, investible benchmark of the performance of the hedge fund asset class, offering diversification across more than 250 hedge funds and nine distinct strategies. The index is asset-weighted by strategy and approximately equally weighted initially by hedge fund.

The index has a rules-based construction methodology designed to emphasise inclusiveness and minimise selection bias, RBC says, and inclusive selection criteria that encompasses hedge funds that may have lock-ups, redemption gates, low liquidity or that are currently closed to investment.

According to RBC Capital Markets, at the beginning of this year the assets under management of the 255 funds included in the index totalled USD206bn, which it says represents approximately 20 per cent of all hedge fund industry assets.

Between the inception of the index on July 1, 2005 and the end of last year, RBC says, the index has closely tracked returns on hedge funds, according to the HFRI, MSCI and Credit Suisse/Tremont indexes, and outperformed other recognised investible hedge fund indices.

At the end of February the largest strategy in the index was equity/long short, with 93 funds and a weighting of 37.3 per cent, followed by multi-strategy with 36 funds and 14.8 per cent, credit strategies with 31 funds and 12.1 per cent, merger and special situations with 27 funds and 10.9 per cent, and macro with 23 funds and 9.1 per cent.

Hedge ETS obtains exposure to the index through swap contracts with Royal Bank of Canada and is subject to a management fee. It offers daily liquidity, the ability to redeem shares close to net asset value and a choice of unleveraged (1X) and three times leveraged (3X) shares.

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