Dexion Capital's third and latest London Stock Exchange-listed fund of hedge funds has raised GBP 83 million in the recent placing and offer for subscription.
Dealings in the shares of Dexion Tradiing, the new fund of hedge funds, are expected to commence on the London Stock Exchange this Monday 29 November 2004.
Dexion Trading's investment objective will be to target US dollar annualised returns on its investment portfolio of between 7% and 12% (net of all fees) and annualised volatility of less than 9% in each case over any three to five year period, with little or no correlation to traditional equity benchmarks.
The sub-manager with responsibility for implementing the company's investment policy is FRM investment Management, part of the FRM Group. The FRM Group is one of the world's largest fund of hedge fund managers with over USD12 billion under discretionary management in funds of hedge funds and 190 people employed globally, with offices in London, New York, Tokyo, Sydney, Guernsey and San Diego.
In a similar way to Dexion Capital's previous offerings, Dexion Absolute and Dexion Equity Alternative, Dexion Trading will replicate a fund. In this case the investment strategy will be based on FRM's Absolute Alpha Opportunitistic product, which since April 2001 has returned investors 29.23% (sterling class) and exhibited long term volatility of around 3.5%. It has outperformed both the MSCI World TR Index ($) and the FTSE All Share Index since June 2002, when it adopted its present form. It is expected to have 60% or more overlap in managers.
Dexion Trading's portfolio will be allocated approximately 80% to directional trading strategies, and 20% to relative value strategies. These allocations seek to balance higher but more volatile returns from directional trading strategies with lower but more consistent returns from relative value strategies. The overall portfolio will aim to have little or no correlation to traditional equity benchmarks.
The investment advisors and portfolio construction of the three Dexion products differ from one another. Dexion Capital's existing London-listed products are Dexion Absolute (launched in December 2002 and now with GBP 240m in assets), a broadly diversified product advised by Harris Alternatives and, Dexion Equity Alternative (launched in April 2004 with GBP 85m in assets), a more focussed product with a significant allocation to hedged equity managers advised by K2 Advisors. Dexion Trading aims to provide investors with a product that gives them diversification from traditional bond and equity portfolios.
Nick Browne, Director of Dexion Capital, said: 'We are very pleased with the strong response from new and existing clients to this our third closed ended product, notwithstanding the difficult conditions experienced by many hedge funds in the second and third quarters of 2004. A trading portfolio compliments our other managed products and enables investors to further diversify their sources of return."
Peter Martin, Chief Investment Officer, Rothschild Private Management, one of the investors in the issue, said: "Dexion Capital continues to set a high standard in the sector by bringing independently selected institutional quality fund of hedge funds products to the UK market in a structure that meets the needs of our client base.'"
Bob Cowdell, Managing Director at ABN AMRO, which managed the issue, said: "This issue brings the amount of money raised by ABN AMRO and Dexion Capital to over GBP400 million which is a clear endorsement of the listed closed-ended structure and confirmation of investor demand for institutional quality fund of hedge fund groups."