Absolute Capital Management Holdings, which last year saw assets under management slump following investor redemptions, fund closures and a spin-off of its Argo fixed-income hedge fund bus
Absolute Capital Management Holdings, which last year saw assets under management slump following investor redemptions, fund closures and a spin-off of its Argo fixed-income hedge fund business, has announcedthe reorganisation and rebranding of its fund management business and the relaunch of two funds under the new Xanthus brand.
By combining previously separate funds, the new business will operate two equity funds, the Xanthus Germany Fund and the Xanthus European Fund, focusing on European equities. Both funds have been structured to appeal to investors looking for high levels of transparency, liquidity and market focus.
The new funds, managed by Xanthus Asset Management, a newly-formed subsidiary of Absolute Capital, began trading last month with opening balances in cash, providing flexibility and agility to take advantage of prevailing market conditions.
Absolute Capital argues that with the restructuring phase for the company and its Absolute-branded equity funds having been largely completed before the recent industry turmoil, it is now in a good position to launch the new funds ‘at a time when the need for change and adaptation in the industry has never been more pressing’.
The company believes that the Xanthus funds are representative of an emerging ‘third generation of hedge fund products, differentiated from their predecessor funds and industry peers by having higher levels of risk controls, real mark-to-market transparency on a timely basis, lower leverage and higher liquidity, tightly-focused investment objectives and restrictions, ‘investor-friendly’ fee structures, smaller fund size and more modest target returns.
Previously known as the Absolute Germany Fund, the Xanthus Germany Fund will invest in equities of issuers chartered or listed in Germany and the surrounding German-speaking countries having market capitalisations in excess of EUR400m.
The fund’s principal investment strategy is long/short pairs trading, thought it will employ a range of trading strategies suited to prevailing market conditions. Germany and the surrounding countries have traditionally been the company’s core area of expertise; last year the Absolute Germany Fund generated a 21.35 per cent return, significantly outperforming its benchmarks and peer group.
The fund will seek to provide a high level of transparency, specifying portfolio positions on a monthly basis. Total fund size will be capped at just EUR200m, allowing the fund to take advantage of market opportunities unavailable to larger funds. The fund’s fee structure will remain 2-and-20, but the company says various investor-friendly modifications have been made to performance fee calculation.
Created through the combination of the A-class portfolios of the Absolute European Catalyst Fund, the Absolute Return Europe Fund and the Absolute Large Cap Fund, the Xanthus European Fund will invest in equities of European issuers listed on major western European exchanges with market capitalisations generally in excess of EUR1.5bn.
The fund’s investment strategies and offering terms will be substantially similar to those of the Xanthus Germany Fund, except that its investment programme is pan-European and the minimum market capitalisation of its portfolio positions is significantly higher. Portfolio capacity has been set at EUR300m. The Xanthus European Fund will build on the strong 2008 performance of the Absolute Large Cap Fund, which returned 8.61 per cent.
ACM Equity, a separate subsidiary of Absolute Capital Management Holdings, continues to manage the five Absolute-branded funds with a view to completing the disposal this year of assets from their B-class portfolios (side pockets), which were created as part of the restructuring of the company and its business in October 2007. The group plans to wind up ACM Equity’s business upon the completion of asset disposals from the B-class portfolios.
‘For investors with a medium-term view, the Xanthus funds represent an opportunity to capture value across these deeply depressed markets,’ says Absolute Capital chief executive Glenn Kennedy.
‘Free from legacy trading positions, the two funds are unencumbered and therefore ideally positioned to achieve their aim of delivering attractive returns to risk-adverse investors.’
‘Taking account of the current issues facing the industry, the Xanthus funds have been structured to provide investors with a much higher degree of transparency and liquidity coupled with clear investment objectives and risk controls, all of which is aimed at delivering sustainable and attractive returns.’