Alternative asset manager Ermitage Group has announced the launch
of two London Stock Exchange-listed notes that provide professional investors
with tax-efficient access to offshore funds of hedge funds.
The notes, which will be open for subscription on June 1, are to be issued by
Japanese investment bank Nomura and will use its flagship exchangeable bond
platform. There is a minimum investment requirement of GBP50,000.
The Equity Long/Short Note tracks the performance of two of Ermitage's longest
established funds of hedge funds, the European Absolute Fund and North
American Absolute Fund, both with track records dating back to 1999 and
combined assets under management exceeding USD200m.
Within the structure, a 90 per cent allocation is made to Ermitage's Europe
Absolute Fund and a 10 per cent allocation to the North America Absolute Fund.
With the four-year global equity bull run now apparently at an end and with
high levels of trading volatility, Ermitage says the product aims to offer
investors an effective way to capture the market upside while reducing
downside risk.
The Resources Note tracks the performance of Ermitage's USD110m Resources
Fund, which enables investors to profit from opportunities in global commodity
markets in an actively managed structure.
The firm says investors are increasingly attracted to the diversification
benefits of including commodities within a portfolio. Since its launch in June
2005, Ermitage's Resources Fund has outperformed passive commodity indices on
an absolute and risk-adjusted basis.
As exchangeable bonds, the two UK-listed notes will be written over a 10-year
term. They benefit from recent regulatory changes and have been established as
onshore vehicles subject to the UK's capital gains tax rules. The change is
expected to offer professional UK investors access to an increasing choice of
hedge fund products that have been largely inaccessible to date.
Ermitage says the notes are being launched into the market at what is widely
believed to be an optimal time, where funds that can go long or short are
becoming increasingly popular with investors. Both products focus on capturing
market opportunities, while providing greater levels of downside protection
than traditional long-only investments.
The average annual performance of Ermitage's funds combined in the Equity
Long/Short Note has exceeded 8 per cent since December 1999, a period during
which global equities, as measured by the MSCI World Index, returned just 1
per cent.
The Ermitage Resources Fund tracked by the Resources Note has delivered an
average annual return of 13.68 per cent since its launch in June 2005,
outperforming the S&P GSCI, a commodities index, with less than half of the
index's volatility.
The notes have been created in partnership with IGS Group, the consultancy and
advisory firm established by former HFR Asset Management Europe managing
director John Godden. IGS advises on product design, market positioning and
distribution for hedge funds, funds of funds and service providers, and
provides technical advice on regulatory impact, market assessment and
marketing of funds and investment products.
'These two new products are designed for wealth managers, private banks and
sophisticated on-shore investors, giving a wider group of investors the
opportunity to access some compelling specialist hedge fund strategies,' says
Ermitage chief executive Ian Cadby.
'Paul Myners, our group chairman, has been a long-term advocate of broadening
the accessibility of hedge funds, and these products will increase the choice
for professional investors based in the UK, without punitive tax
implications.'
Ermitage chief investment officer Jonathan Wauton says: 'Following its launch
in 2005, the Resources Fund has delivered better absolute and risk-adjusted
performance than passive commodity indices, with significantly less
volatility.
'Equally, our European Absolute Fund, which represents 90 per cent of the
Equity Long/Short note, has a proven track record spanning two bear market
periods, protecting capital and outperforming many of its peers over the past
six months.'
Garry Topp, Nomura's director of equity and fund derivatives, adds: 'The hedge
fund sector is crowded, yet Ermitage stands out for the quality of its
investment management and consistently high performance. We expect
professional investors to welcome the launch of these notes and the tax
efficiency and access to Ermitage [funds] they offer.'
Ermitage Group, which has offices in Jersey, London and New York, was acquired
by its management and investment trust Caledonia Investments in March 2006
from South Africa's Liberty Group. A provider of investment services to
institutions, pension funds and private clients, the group made its first
hedge fund investment in 1984 ands now has more than USD2.8bn in assets under
management. It also provides a private client services through its global
wealth management services division.
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Date: Monday, April 21, 2008
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