Financial Risk Management is planning to offer access to its flagship Diversified strategy through an initial public offering of shares in FRM Diversified Alpha, a closed-ended fund of hed
Financial Risk Management is planning to offer access to its flagship Diversified strategy through an initial public offering of shares in FRM Diversified Alpha, a closed-ended fund of hedge funds to be listed on the London Stock Exchange.
FRM Diversified Alpha will invest in a portfolio of hedge funds constructed and managed in a manner consistent with FRM’s Diversified strategy. Its investment objective is to produce significant returns over cash, with low volatility and low correlation to equities and bonds over a full economic cycle.
FRM began managing Diversified-style funds of hedge funds in January 1998 and currently manages more than USD10bn in this strategy for institutional investors including some 300 pension funds.
Paul Dunning, chief executive of Financial Risk Management, FRM’s UK-based operations and the adviser for FRM funds, says: ‘For over a decade Diversified has been our flagship strategy, and we are planning to offer clients a way to access it through a listed vehicle. Diversified appeals to investors seeking the absolute returns of premier hedge fund managers through a strategy designed to reduce risks.
‘Importantly, we are seeing quality capacity from a number of managers who believe that this difficult market environment will result in very strong investment opportunities. Our plan to list our flagship strategy follows the successful listing of our credit strategy, FRM Credit Alpha, last year and its subsequent strong performance.’
FRM Diversified Alpha, which will be managed in Guernsey by FRM Investment Management, will invest in all major hedge fund strategies including equity long/short, specialist credit, relative value and directional trading, in addition to allocations to emerging managers and strategies.
The strategy is supported by FRM’s global investment team of some 45 investment professionals in London, New York, Tokyo and Guernsey and benefits from the group’s relationships with hedge fund managers.
FRM says it will absorb all of the costs associated with the launch of the listed vehicle. FRM Diversified Alpha has been structured with discount controls, including the ability to buy back shares and the requirement for a continuation vote for each share class if shares of that class have traded at an average discount exceeding 5 per cent over any rolling 12-month period.
The firm expects to offer sterling, euro and US dollar share classes. Dresdner Kleinwort is sponsor and sole bookrunner for the potential offering, and the deadline for receipt of placing commitments is expected to be June 18.
FRM manages some USD14.5bn in funds of hedge funds for institutional and other sophisticated investors worldwide. Founded in 1991 by Blaine Tomlinson, the group has more than 200 employees in offices in London, New York, Tokyo, Sydney and Guernsey.
