Invesco Global, the European and Asian arm of Invesco Asset Management, plans to use over-the-counter foreign exchange derivatives in its first long/short equity hedge fund for non-U.S. investors. The fund, which began trading last month, currently uses exchange-traded futures, said Brett Bastin, head of product development for absolute return strategies in London. It has a long/short large cap focus and then uses futures as an overlay to gain exposure to movements in the U.S. bond market and the Standard & Poor's 500. Because it includes non-U.S. investors, currency options will be used for hedging purposes. As the fund grows it will start using OTC options, as well as continuing to use listed options, for currency hedging.
The investment vehicle has been funded with USD10 million in seed capital from parent company AMVESCAP, but Invesco is still fundraising. Bastin said the firm has not solidified a target size. The hedge fund is aimed at institutional investors in Europe and Asia and Invesco is waiting for approval from regulators to offer it to retail investors in Hong Kong.
The long/short fund will have an average leverage of 0.5 times and a maximum leverage of 1.5 times the assets, with a target return of 10% over the cash rate or U.S. Treasuries.
