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CastleRock Asset Management launches inaugural newcits

Date: Monday, February 7, 2011
Author: Hedgeweek.com


This week saw the launch of an inaugural newcits from New York-based CastleRock Asset Management – the CastleRock US Liquid Equities UCITS fund. The US equity specialist, whose BVI fund uses equity long/short to generate alpha, becomes the first US hedgie to roll out an independent newcits not hosted on a banking platform and gives European institutional investors a unique opportunity to invest directly into US equities. “We’re using Luxembourg Financial Group as the management company but we’ve set up own SICAV so we’re not tied to a specific umbrella,” explained Jamie Lewis, CastleRock’s Director of Investor Relations. Paul Tanico established CastleRock in 1993, shortly after which Ellen Adams joined as co-portfolio manager. Together they have over 60 years’ buyside experience: the fact that the newcits is being managed by a US-based male and female investment team is in itself quite unique. When asked why the firm had decided to launch an onshore variant of the BVI fund Lewis said that they’d had a lot of success offering the latter as an equity diversifier to US pension funds within their equity allocations, rather than something to be lumped within the general alternatives category of a portfolio. “We saw Europe as a great way to diversify our investor base,” said Lewis, adding that the fund, which launched with USD25million, had already attracted investors in France, Italy, Switzerland, Austria and the UK.
“We only invest in US firms with a market cap of USD1billion or more so the fund is very liquid,” explained Lewis. As a result, tracking error in the newcits is expected to be minimal as shorting will only be done via swaps. Benchmark returns are 15 per cent net. All in, fees will be charged on a 1.5 and 20 basis for the institutional share class. “Our risk-adjusted returns are better than traditional long/short indices and long-only equity managers so we’re priced competitively with both,” said Lewis. Average holding period for long positions will be 12 to 24 months, and for synthetic short positions it’ll be six months or less. “As investors CastleRock’s more thematic in nature. The team looks for 50 per cent returns on every long position over two years with 10 per cent or less downside and 20 per cent returns for our shorts with 10 per cent or less downside. Lewis said that US company fundamentals are strong right now and that CastleRock expected a lot of that money sitting on the sidelines to come back into the equity markets. Key sectors that the fund will look at are likely to include technology, telecoms, consumer cyclicals, energy and financials. “There’s real opportunity in the US equity markets right now for European investors,” concluded Lewis. Deutsche Bank is the fund’s prime broker, Ernst & Young is auditor, with BONY as administrator.