Pacific World, a Hong Kong-based fund of hedge fund specialist, will soon launch its Fixed Income Strategy Fund, the firm's twelfth fund-of-hedge-fund product. The new fund targets an annualized return of 250bp over Libor, with annualized volatility below 3%.
"We've seen a growing demand for fixed-income hedge fund products in Asia, especially from institutional investors such as insurance companies and corporates who are concerned about volatility," says Chris Choy, Pacific World's CIO.
The fund will launch with $12 million in seed capital gathered from Pacific World's existing institutional clients. "Our fixed-income fund was created to be a replacement for the role of a bond fund or deposit allocation in an investor's portfolio," he adds. "Based on our back-testing analysis, we use a carefully selected combination of low-volatility strategies to provide higher liquidity and lower volatility with a similar level of return."
Investors need to provide only two weeks notice in order to redeem from the fund. Around 60% of the fund is invested in money market instruments, while the remaining 30% is invested in fixed income-related hedge fund strategies including distressed debt, high yield, capital structure arbitrage and convertible arbitrage.
"Initially we're allocating this to five hedge fund managers," Choy concludes. "Some of these we are already invested in, and others have already gone through our rigorous due diligence process."
The fund charges a management fee of 0.75%, but will charge no performance fee.