Man doing what it can to prove its hedge note not like the others

Date: Monday, February 19, 2007
Author: Keith Damsell, Mutual Funds Reporter, Globe and Mail

Psst! Wanna buy a hedge fund note?

Since 2005, that product pitch may have been met with a slamming door. The well-publicized scandals at Portus Alternative Asset Management Inc. and Norshield Asset Management (Canada) Ltd. decimated the retail market for hedge-fund-linked, principal-protected notes.

Man Investments Canada Corp. is working hard to change the reputation of the tarnished asset class. This month, the Toronto unit of Britain's Man Group PLC unveiled the Man MGS Access (Canada) Notes. The note sets a new standard for disclosure, itemizing the products' 15 hedge fund managers, their investment strategies and their historic performance. The 12-year note requires a minimum investment of $5,000.

"There's a tough sentiment out there at the moment. If we continue to do our job as we've done over the past 20-odd years, [our sales will take off] like a bush fire,"said Alex Lowe, chief executive officer of Man Global Strategies.

Man Global is the investment arm of Man Group, a publicly traded financial services giant that manages about $60-billion in hedge funds. The new Canadian note has blue-chip backing, too, from guarantor Citibank NA.

Despite good reviews from analysts, the Man note is having some difficulty when it comes to sales and marketing. The meltdown of Portus and Norshield prompted the Canadian Securities Administrators to begin a regulatory review of hedge-fund-linked notes last year. Until there's some clarity, some financial heavyweights are shunning hedge fund notes, including Bank of Montreal, Royal Bank of Canada and Toronto-Dominion Bank.

Behind the scenes, Man Investments is doing what it can to allay fears and educate Bay Street. The CSA, meanwhile, is expected to disclose new guidelines for notes later this year.