A group of former Bear Stearns traders are set to launch a hedge fund, dubbed AquaFund, today that will use over-the-counter derivatives and structured products. The fund is predominately a long-short equity fund, but it will also trade commodities, futures, fixed income and structured products, said Scott Kimball, the senior managing director. "We come up with an alpha-bet," Kimball said, such as the dollar falling against the yen, "And structure a derivative around it that protects our principal, but clears a fairly substantial rate of return if we're correct."
By year-end, Kimball expects to accumulate USD25 million of investments. This money does not include a seed deal, under discussion with about eight counterparties, including the Man Group, Weston Investment and DRI. Kimball projects over the next two years it could reach USD1 billion, but this depends heavily on distribution agreements overseas. Besides the many co-managed deals AquaFund has signed in the U.S., it has also signed one in Latin America and one in Taiwan and China. "Those could be a billion dollars each," Kimball said. "But the USD1 billion is still a target." The fund will open with USD5-10 million in assets under management, solicited from high-net-worth investors.
The fund's main trading desk will be in Atlanta, Ga. and another desk will open in Newport Beach, Calif. around June. Banc of America Securities will be the fund's prime broker.
