Man retail hedge fund hits Hong Kong market

Hedge fund giant tailors product with an attractive return to suit Hong Kong investor appetite.

Man Investments' long awaited Hong Kong retail hedge fund product is finally set for launch. The offer period opens today September 6. The Man Hedge Diversified is the twelfth hedge fund to be authorized by the SFC for retail sale since the new legislation was put in place two years ago.

The new fund is a multi-strategy, multi-manager fund of hedge funds, targeting an annualized return of 15%-17%, with an associated volatility of 8%-10%. Man's Asia Pacific regional manager Matt Dillon says, "Unlike most fund of hedge funds which target very low levels of volatility, this product is aiming to achieve attractive returns at single digit volatility."

Dillon says the product has been specifically tailored with the characteristics of Hong Kong investors and the SFC guidelines in mind. He believes Hong Kong investors have an appetite for higher return products and are willing to tolerate slightly higher volatility to achieve this.

Victoria Owen, London-based co-head of Man Global Strategies, explains, "The judicious use of the leverage makes the more attractive returns possible. For every $100 investors receive an investment exposure worth $150."

The fund of hedge fund portfolio will start its life with an initial allocation of one third of the portfolio to managed futures, 25% to equity hedge, 23% arbitrage, 12% equity long/short and 7% to directional strategies. The minimum investment level has been set at $20,000, which Dillon says has been set to target the mass affluent market.

"The minimum investment amount is relevant to the type of investors we are targeting. There is still a long way to go to educate the public about the risk and rewards of hedge funds before we can bring down minimum investment levels," says Dillon.

Given the success of Man's AHL Diversified Futures Fund, (launched in 1998, prior to the legislation authorizing retail hedge funds in Hong Kong) which has raised cumulative sales of $600 million, Dillon is optimistic about the prospects for new fund. He estimates that Man Hedge Diversified will raise about $20 million during the initial offer period which is due to close on 25th October.

"Investors in Hong Kong know the AHL name well, but may not know that Man Investments is behind it. We will address this by re-branding the AHL fund as Man-AHL Diversified Futures Fund," he says.

Despite the somewhat disappointing recent performance of hedge funds globally, Dillon believes that Man is launching the right product at the right time. "Internationally, there has been an explosion in interest in hedge funds, and these products have increasingly entered the main stream. We know that there is a strong demand for this product from every investor category, including institutional, high-net worth and retail."

He adds that the multi-strategy, multi-manager nature of the product makes it suitable for first time hedge fund investors, since it enables risk to be well diversified and volatility to be controlled.

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