London-based Fortune Group is to launch a principal protected note issued by a leading universal bank, the proceeds of which will be invested in funds managed by early stage hedge fund managers. <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Fortune Chief Executive Simon Hopkins said: "These are managers that we have identified through our emerging manager program. Ample evidence exists to demonstrate that superior returns come from investing in early-stage hedge funds. Our experience over the last seven years provides testament to this."
<?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Hopkins added: "Fortune will not charge a performance fee on the emerging manager assets, so in effect investors will be buying a fund of funds with principal protection that cost little more than a typical fund of funds."
The search for emerging managers is a theme than many groups are now pursuing. Fortune already has a portfolio of investment professionals each of whom is running a hedge fund in its first year of existence. As seed capital providers, Fortune knows these funds very well, and will be able to closely monitor their performance as part of its asset allocation role, Hopkins explained. The initial allocation will be an approximately equal weighting to each emerging manager.
The note will have a seven year term and offers investors an initial 100% exposure to the underlying funds. A leverage/de-leverage mechanism will allow leverage of up to 1.5x to be employed. Up to 15% may be invested in Fortune's Market Wizards Fund Plus.
Fortune portfolio manager Jack Schwager said: "Investors preferring the upside potential offered by a concentrated portfolio can increase their percentage of winning months and constrain their drawdowns by allocating a minority of the portfolio to a diversified investment that has a high probability of positive return."
Schwager added: "Allocating up to 15% of the portfolio to Market Wizards Plus should provide the portfolio with more stable returns in each month, while still not sacrificing the potential for well-above index returns from the selection of a superior, more concentrated portfolio of single funds".
The Market Wizards Fund Plus has returned over 16% since launch at the end of 2001 and has delivered 24 of 26 winning months. The fund has had one month with a loss greater than 1%, and annualised volatility below 3%.
Background Note: The Fortune Group is a London-based asset management company, authorised and regulated by the Financial Services Authority and the SEC. Founded in 1996, the company is focused on the alternative asset arena, and runs nine private label advisory mandates as well as Fortune's own funds of funds including the Market Wizards Fund. All the funds are co-advised by Fortune's affiliate research company Global Fund Analysis Ltd. Fortune actively seeds and sponsors a select number of early-stage hedge funds and has raised over USD 1 billion of assets in this capacity.
copyright hedgeweek 2004