New Star Asset Management, a London-based asset manager with USD35 billion under management, is offering its first hedge-fund index investment in the form of listed shares. Dubbed Hedge ETS for exchange-traded security, the shares reference The Royal Bank of Canada Capital Markets' Hedge 250 index. A separate class of three-times levered shares is also available.
New Star entered a swap with RBC to structure the investment, in which it receives the returns of the index on a monthly basis. UBS, which is placing agent and sponsor of the securities, is managing the mismatch between the monthly index returns and the daily liquidity of Hedge ETS. Officials at UBS and RBC declined comment.
Ravi Anand, head of structured products at New Star, said it chose to work with RBC because its index is investable and gives returns that are closer to published hedge fund benchmarks than other comparable indices. With 250 funds referenced, it is also the most diverse available, he noted. The collapse of Amaranth "has been a big deal for investors," he said, explaining that the wide range of the RBC index adds to its appeal post-Amaranth. "In some ways it played right into our hands," he added.
The offer closes to investors November 21 and places November 22. It is being offered globally, excluding the U.S. Anand said it is too early to comment on how successful marketing has been so far, but he is hopeful the securities will raise USD200 million. It will also be possible for New Star to issue further securities at a later date, although the asset manager has no plans for this yet.
