Storebrand Alternative Investments, the alternative asset management arm of Norwegian insurer Storebrand, is considering making its first use of derivatives to offer a capital guarantee on a planned fund of hedge funds launch. Ove Christian Norheim, managing director in Oslo, said the asset manager will select a derivatives house, through its sister company Storebrand Investments, to manage the guarantee if it goes ahead with the plan. Hans Aanis, cio at Storebrand Investments in Oslo, said it would select derivatives counterparties according to credit rating and price. The decision to offer the product will hinge on customer demand.
The fund of funds will invest in between six and 10 long/short equity hedge funds. However, Norheim said the size, maturity and risk reward profile of the capital guaranteed product have not yet been determined.
While offering guaranteed alternative investment products is fairly standard issue in the Scandinavian markets, the concentration of Storebrand's fund of hedge fund portfolio in long/short equity funds will differentiate it from the more diversified offerings common in the market, said one derivatives structurer. Investors are increasingly turning towards long/short equity as a means of obtaining upside equity performance, while also benefiting from some downside protection, he noted.
