Gartmore plans to launch a Pacific region and emerging market hedge fund in July that will use equity derivatives. Martin Phipps, head of hedge funds in London, said the vehicle will use over-the-counter and listed derivatives to go long and short equities in the Pacific region and all emerging markets. Phipps anticipates a greater role for futures than OTC derivatives because Gartmore's skill is in stock selection and it is unlikely to want to pay option premiums.
Phipps said Gartmore is preparing to launch the fund, dubbed AlphaGen Pictor, now because it believes it has a good track record from running a similar long/short emerging market fund on behalf of Key Asset Management. Gartmore took over this fund in May last year and has made a gross return of 10%, according to Phipps. He added investors are starting to look at investing in the emerging markets again after a bad year in 2000. Chris Palmer, senior investment manager in London, and the fund manager for Key Asset Management's fund, will run the hedge fund.
The prime broker for the fund is Morgan Stanley. Phipps said it chose Morgan Stanley because it has an existing relationship with the firm and because Morgan Stanley boasts extensive coverage of emerging markets. The fund will be initially capped at USD100 million but Gartmore will reassess the market liquidity at that level to see if it can be increased.
