Challenger rolls out long/short hedge fund

Listed financial services groupChallenger Internationalhas joined the growing list of fund managers to enter the hedge fund marketplace, launching a long / short Australian equities fund through its alternative investment management business, BluePeak, today.

The BluePeak Long Short Australia Fund, with a minimum entry fee of as little as $5000, will aim to attract retail investors with an undertaking to generate returns from both rising and falling share markets.

The fund, to be based on a stock index developed by Merrill Lynch, will employ a quantitative selection strategy to identify the ten stocks most likely to rise and the ten stocks most likely to fall in value amongst Australia’s top 100 companies. The composition of the index will be redetermined every month.

"The opportunity to take advantage of both rising and falling Australian share prices in the same managed fund has not generally been available to private investors," Challenger general manager of alternative investments Hugh Latimer says.

Challenger had initially set out to develop a multi-manager fund-of-hedge funds, but abandoned the idea after discovering a lack of depth amongst Australian hedge fund managers.

The group also considered launching a hedge fund using offshore managers, but was held back by unfavourable tax implications.

Challenger plans to market the fund through its existing network of financial planners and advisers.

The fund will also be offered through a range of master trusts, including the Merrill Lynch Master Trust, and wrap accounts from groups like BT Funds Management and Macquarie Bank.

A simulation of the fund’s investment strategy in the period from 1 September, 1992 to 31 October, 2001 has generated an 18.6 per cent pre-tax compound annual return, after fees and expenses, according to Challenger.