DWS Investments, the fund management arm of Deutsche Bank, is planning to raise Euros 1 billion from German investors with a series of hedge fund launches in 2004.
The chances of the new investment class taking off in Germany are looking healthy. Initial predictions by private asset managers show alternative investments like hedge funds could have a portfolio share of up to 20 per cent in Germany by the end of 2004.
On the one hand, DWS will launch single hedge funds which will be marketed to both institutional investors as well as private individuals via so-called private placements. In addition, DWS will also launch funds of hedge funds investing in domestic and foreign single hedge funds and to be sold to private investors. These products will be managed out of DWS in Frankfurt.
The investment team a DWS will be supported by colleagues from the Hedge Fund Team at Deutsche Asset Management in the USA, who have years of experience in the arena of process and system applications relevant to hedge funds. Its US colleagues' know-how will be also be invaluable in selecting single funds to construct the funds of hedge funds.
Klaus Kaldemorgen, Board Member responsible for equity fund management at DWS, said: "For the most part, we will undertake management of the hedge fund ourselves. In the past DWS mutual funds have on average significantly beaten their benchmarks and achieved outstanding ratings. The skills that produced these well-documented successes will be no less relevant to DWS' hedge fund in contributing their core competencies of market analysis and stock picking."
According to Kaldemorgen, DWS is initially planning to launch a long/short global equity market neutral fund as well as a long/short bond fund. In addition, DWS also plans to launch hedge funds with the following strategies: long/short global equity opportunistic, long/short Asia Pacific equity opportunistic and currency strategies.
In launching a fund of hedge funds in 2004, DWS wishes to provide investors initially with a "Multi Strategy - Balanced" product characterised by a balanced risk-yield profile. This will be achieved by combining a variety of hedge fund strategies from long/short equity through to global macro.
DWS also intends to respond to the more risk-friendly investor by launching a so-called "Multi Strategy-Opportunities" fund of hedge funds. This product will use a number of different strategies with an inherently higher risk profile coupled with higher potential yields.
Kaldemorgen said: "Diversification in several single funds reduces the risk which means that fund of hedge funds are considerably more appropriate for private investors."
DWS is confident that institutional and private investors will respond well to this new asset class. The company stated: "As there are no signs that market uncertainties will disappear in the near future it is crucial to develop new investment solutions for demanding customers. A clear reaction to the past slump in the international equity markets is continued and growing interest in absolute return concepts".
copyright hedgeweek 2003