Hedge funds go retail
The recent surge in interest in hedge funds has spread to the retail market with the launch of Hedge Funds Australia (HFA) hedge fund.
HFA managing director Spencer Young says the fund will be the first of a series of hedge funds the group is planning to release in coming years. The Australian Blue Chip Fund is one of the first hedge funds available to Australian retail investors, alongside a very different hedge fund offered by Ord Minnett. Wilshire has also been making waves for hedge funds with its recent wholesale offering.
Young describes the fund as a conservative hedge fund, offering a risk profile between fixed interest and share investments. He says it offers similar returns to a domestic share fund but is aimed at complementing share investments, because in a falling share market, the fund will significantly outperform share funds.
The fund uses a combination of shares, options and warrants to create what Young calls a "downside buffer".
"From a financial adviser's perspective, inclusion of this fund, with its inherent hedge strategy, provides a safety net against markets that stagnate. It therefore increases the security of the client's portfolio, while maintaining an attractive yield," he says.
Young says the fund is aimed at investors in the "wealth maintenance or wealth harvesting" part of their investment careers - generally those approaching or already in retirement.
HFA hopes to distribute the fund mostly through financial advisers and stockbrokers. The management fee of 1.5 per cent pays a trail commission of 0.5 per cent and there is a 5 per cent entry fee which is 80 per cent rebatable to clients.
Young says the rise in profile of hedge funds reflects a changing dynamic within the funds management industry.
"Over the next five years, the market is likely to polarise between index funds and alternate funds," he says.
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