Man launches long/short equity fund of hedge funds

Date: Thursday, October 13, 2011
Author: Wendy Chothia, HedgeWeek

Man, one of the world's largest listed hedge fund providers, has announced the launch of Man Long Short Fund, a new long/short equity fund of hedge funds with scheduled monthly liquidity in a Registered Investment Company format.

Man Investments (USA) LLC serves as the Fund's investment adviser and is part of Man's Multi-Manager Business which has approximately USD12.7 billion in funds under management globally as of 30 September, 2011.

Man Long Short Fund, available only to the high net worth clients of the top-tier broker dealers and advisers with an investment minimum of USD50,000, provides a transparent and liquid way to access up to 30 leading long/short equity managers in a diversified portfolio. The Fund will allocate to managers in the US, Europe, Asia and Emerging Markets. Investors will receive scheduled monthly liquidity and 1099 tax reporting. The Board of Trustees does not currently intend to undertake a holdback on tenders.

Man believes the potential downside protection exhibited by long/short equity strategies is the key to their return profile and the basis through which these disciplines can offer more positive risk-adjusted returns relative to traditional long-only equity strategies.

"With a few notable exceptions such as the Fall of 1998, the spring of 2003 and the first quarter of 2009, the last 15 years have been a poor period to invest in the stock-market," says Robin Lowe, Head of Equities at Man Investments, based in New York. "It is common to see a pattern of long bull markets (e.g. 2003-07), punctuated by shorter, sharper bear markets (e.g. 2008). The fundamental justification for the long/short equity approach is not simply that tactical shifts in net exposure to equities can add value: the very existence of a 'short book' is essential to help ensure a degree of downside protection in the event of an abrupt market reversal."

Equities have been a core allocation in most investors' portfolios for many decades. The traditional arguments for maintaining an allocation to equities remain strong despite recent financial shocks and lacklustre performance. Academic research generally holds that equities have more scope to generate investment returns than bonds or cash over the long-term but with much higher volatility or "risk." Man believes a critical question is whether the traditional 'long-only' approach to equity investing is the best way to access equity returns.

According to Art Holly, Head of Portfolio Management for North America: "Average portfolios are still overexposed to equities; we are trying to produce a "smoother" ride by capturing 60% to 70% of the potential upside return of equities but more importantly only striving to participate in 30% to 40% of the downside. I believe it's much easier to return to equity highs from a 10% drawdown than it is a 50% drawdown where you need to make 100% return on your capital just to break even."

The Man Long Short Fund investment team has an average of 15 years of investment experience and global research coverage providing on-the-ground, local knowledge. Man's Equities' Team has received numerous awards and nominations for its long/short portfolios.

"Equity investing has evolved since the 1970s from mutual funds, to style box investing, ETFs, and short-extension strategies. While long/short equity is not a new strategy it has now become a widely accepted investment technique," says John Barbo, Head of US Financial Intermediary Business. "In an uncertain market environment, investors may benefit from allocating to long/short equity strategies. I believe this makes long/short equity a compelling substitute for long-only equities in a portfolio."