U.K. asset management company Gartmore plans to launch a long/short hedge fund Thursday that will invest in European small cap stocks and may use over-the-counter derivatives. The AlphaGen Cetheus fund is being launched to take advantage of investor appetite for alternative investments, according to Martin Phipps, head of hedge funds in London. The fund will start with USD50 million of capital.
The asset manager believes AlphaGen Cetheus fund will plug a gap in the market, as most long/short funds invest in large cap stocks, Phipps noted.
Douglas Shaw, head of derivatives investment in London, expects to use derivatives to reduce the risk and cost of running the fund. Similar funds have used OTC derivatives for a variety of reasons, including selling OTC equity puts to gain exposure to a company when the share price falls to a level with which Gartmore is comfortable, buying contracts for differences and entering total return swaps to gain exposure to particular indices.
