U.K. Asset Manager Eyes Hedge Fund Debut

  • 15 Jan 2001
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Abbey National Asset Managers is considering making its debut in the hedge fund market with the launch of three funds that will user over-the-counter derivatives. The funds would likely each launch with some GBP100-150 million (USD149-223 million) in assets. It would launch the funds only if they each could be expected to grow to USD750 million within three years. "We're not doing this to playact," said Scott Jamieson, head of strategy in Glasgow. The board of directors must still grant approval, and the decision will include factors such as whether hedge funds fit the risk levels Abbey National is comfortable with. The timing of this decision is not certain, but will likely be in the next several months.

If approved, the fund strategies will include a leveraged currency fund, a global macro fund—"That's a euphemism for, ‘we can invest in anything we want,'" Jamieson quipped—and an unleveraged European long-short market neutral equity fund.

Now is a good time to launch these funds because they have low correlation to the equity markets, said Jamieson. The long/short fund is market neutral, making it a good strategy for a mature bull market. Furthermore, hedge funds offer higher management fees than mutual funds, as they are less commoditized.

The currency fund would use plain-vanilla foreign exchange options to make leveraged directional investments. The macro fund could invest in any instrument in any asset class, with a view toward maximizing long-term absolute returns. Derivatives would be used if they were the best means of gaining exposure. The long/short fund would use derivatives mainly to hedge, for example, buying a put on a stock that could potentially fall in the near term.

A hedge fund marketer at a U.S. bank in New York thought the move would be a good one for Abbey National. He noted that many retail asset managers are setting up hedge funds now to capture higher management fees and retain talent.

The funds would be marketed to institutional investors and high-net-worth individuals initially in Europe. Abbey National Asset Managers has some GBP18 billion under management.

  • 15 Jan 2001

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4 Bank of America Merrill Lynch 258,842.43 934 7.10%
5 HSBC 224,273.23 905 6.15%

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5 ING 21,769.65 121 4.46%

Bookrunners of all EMEA ECM Issuance

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3 Morgan Stanley 9,435.23 48 6.71%
4 Bank of America Merrill Lynch 9,019.27 40 6.41%
5 UBS 8,763.73 42 6.23%