Hedge fund firms Man, Cheyne launch onshore funds

Date: Tuesday, September 15, 2009
Author: Laurence Fletcher, Reuters

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Hedge fund firms Man Group (EMG.L) and Cheyne Capital are launching funds that will let a wider pool of investors access their strategies and which will also avoid proposed tough new EU rules.

The launches, which both use an existing structure called UCITS that allows them to be sold across Europe, will not be subject to a proposed European Union directive on non-UCITS funds, which is still being debated and which many hedge fund firms fear could be overly restrictive.

The launch next month by Man Group, the world's biggest listed hedge fund firm, of Man AHL Diversity will give private investors in the European Union with as little as 100 pounds access to AHL, one of the top hedge fund strategies last year.

The fund will be a mirror version of AHL Alpha, one of AHL's strategies which trades in around 90 markets. Investors will pay more than usual for the fund -- an annual 70 basis point structuring fee joining a traditional 2 percent annual management fee and a 20 percent performance fee.

A company spokesman said the extra costs covered the transition of the existing fund into a UCITS structure and could be offset by potential tax advantages.

AHL aims to make money from following trends in global futures markets and its returns usually bear little relation to returns from mainstream investments.

Last year it returned around 25 percent, although this year it has struggled due to a lack of clear trends in some markets and is down about 12 percent.

Meanwhile, Cheyne Capital Management, which earlier this year bought fund of hedge funds manager Altedge Capital, has launched the Cheyne Select Convertibles fund and plans to extend the range with launches of a macro fund and a credit fund within the next year.

The convertibles fund will also be an onshore fund, although the minimum investment is $100,000 (60,441 pounds) or 100,000 euros (87,945 pounds). The fund will have a long bias in convertible bonds but the manager will have the ability to short -- bet on lower prices.