Wed, 23/01/2008 - 06:00
London-based multi-manager Matrix Group has unveiled plans to launch a new fund of hedge funds, the Matrix Emerging Markets Index Fund, which will aim to replicate the diversification and volatility qualities of the Eurekahedge Emerging Markets Index. The initial offer period opens on January 28 and will close on February 20.
The new fund is designed to allow participation in the upside of emerging markets, whilst reducing downside risk. Global money flows are focusing on emerging markets because of their higher GDP growth rates, cheaper labour and good natural resource supplies.
However, history has shown that returns can be very volatile. Between the beginning of 2000 and the end of November last year, the MSCI Emerging Markets Free Index rose by 211 per cent, but over that period, the peak to trough drawdown was 47.76 per cent.
The Matrix Emerging Markets Index Fund will be managed by Darien, Connecticut-based Maxam Capital Management, which also runs the Matrix Max Fund, according to a strict rule-based methodology. It will invest in around 40 underlying hedge funds, creating a portfolio that will be broadly diversified across all emerging market regions and also across asset classes.
From January 2000 to the end of November 2007, the predicted launch portfolio of the new fund, back-tested, would have provided total returns of 305 per cent but with a maximum drawdown of just 9.71 per cent.
'This fund has been specifically designed to offer lower-volatility exposure to emerging market regions,' says Bridget Guerin, managing director of Matrix Money Management. 'The portfolio will consist of around 40 underlying hedge funds heavily diversified across the Far East, Eastern Europe, Latin America and the Middle East and will include equities, debt, distressed securities and currency managers. The managers in the portfolio will be able to hedge out risk via short exposure and other techniques.'
Sandra Manzke, founder and chief executive of Maxam Capital, believes the fund will give investors the ability to access some of the largest and best performing hedge funds in the emerging markets asset class with a low minimum investment of GBP10,000.
By investing through an enhanced index product, investors immediately add diversification to their portfolio, as assets are deployed among numerous managers, and have the potential for lower volatility resulting from lessened concentration risk compared with investing directly in one manager.
The fund is suitable for UK self-invested personal pensions and small self-administered schemes and offshore bonds, with all share classes listed on the Irish Stock Exchange. The institutional sterling and US dollar share classes carry an annual management fee of 1.35 per cent, while the retail share class fee for both currencies is 1.95 per cent with a 0.4 per cent trail for IFAs. The performance fee is 10 per cent and there is an initial charge of 5 per cent.
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