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 quippedand 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.