Gartmore to push into retail hedge fund market

Date: Wednesday, April 29, 2009
Author: Raji Menon, Reuters

Fund manager Gartmore is preparing a major push into the UK retail hedge fund market after picking up strong demand for its first products in the sector, a senior executive said.

The plan comes after a rough year for hedge funds worldwide, and following steep outflows from Gartmore's own institutional funds, but advisory Board member Phil Wagstaff is convinced demand from retail investors is on the rise.

"The hedge fund world and the UK retail world will collide - we see this as a core area for us going forward and we see this as a growth area for the industry," Wagstaff, who is also head of global distribution at the firm, told Reuters.

Gartmore is in the process of launching a UK Absolute Return Fund after it launched in February a European long/short product. Both funds comply with EU Ucits rules for cross-border sales and are variations of Gartmore's existing hedge funds for institutions.

He pointed to the 50 million pounds raised by the European fund as evidence of strong demand from retail investors.

"We have plans to launch a number of these (absolute return) retail funds which will be variations of our hedge funds.

"What happened last year was that a lot of people were caught out because they had been buying hedge funds that had a lot of beta.

"Those funds will struggle going forward and people will look to invest in 'genuine' hedge funds - funds that provide genuine low correlation with equity markets," said Wagstaff.

INFLOWS

Wagstaff said Gartmore was beginning to see inflows into its existing institutional hedge funds after seeing steep outflows last year.

"We took a decision not to impose any redemption gates which meant that we were used as an ATM by most of the fund of hedge funds that needed to raise cash.

"But we are now seeing investors who raised too much liquidity coming back, wanting to invest."

Privately-held Gartmore -- which is 50 percent owned by staff and 50 percent owned by private equity firm Hellman & Friedman -- is also making new hires of investment and sales professionals as it seeks to grow the business.

At the end of 2008, Gartmore shed 60 staff across the board.

"The redundancy programme was more about driving efficiencies, but the new hires will be in areas we are looking to develop.

"We have a strong backer and that leaves us in a position where we can invest during a downturn in the cycle which we can benefit from when the markets improve," said Wagstaff.

The fund manager is looking to make 10 new senior hires this year, including a new head of UK business development.

Wagstaff said the firm would continue to look to make small acquisitions. Gartmore had bid for New Star Asset Management but lost out to Henderson which acquired the fund manager for 115 million pounds.

"We have no regrets. We made what we thought was the correct offer. (But) if opportunities like that arise again, we will be looking at it," said Wagstaff.

Gartmore has around 18 billion pounds in assets under management.