Deutsche Bank has started allowing investors in managed accounts to tailor their risk and participation to hedge funds by entering offsetting overlay trades. Charles Hopkinson-Woolley, a director in managed account specialist sales at Deutsche Bank in London, said it offers clients transparent managed accounts, in which they can overlay trades to cut their exposure to strategies they deem too risky. He believes that this will encourage a new raft of investors to take exposure to hedge funds.
In a managed account at Deutsche Bank the prime brokerage arm of the bank has custody of assets. This leads to all the general transparency and liquidity benefits associated with managed accounts, including reduced risk of accounting fraud, but the advantage of knowing the strategies of the accounts means investors can reduce sensitivity to the funds and enhance returns, as part of an overlay technique. This could be a further incentive, particularly for pension fund consultants, to choose managed account portfolios over traditional fund of funds, noted Hopkinson-Woolley.
