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Derivatives

WestLB's Asset Management Arm To Launch First Hedge Funds

WestAM, the asset management arm of WestLB, plans to launch its first two hedge funds in September. Markus Stadlmann, director of global asset allocation, said the firm has been aiming to launch these types of funds to its existing clients because over the past two years it has seen strong demand from continental Europe for absolute-return strategies. Investors have been asking for investment vehicles that offer diversification benefits under adverse market conditions, he explained.

The funds will be a global multi-strategy absolute return fund and a global fixed-income macro fund, launched under the brand name Navigator. Both funds have EUR50 million in seed money from WestLB and WestAm plans to double that amount in each fund with outside investment over the next 12 months. Stadlmann said the macro fund will likely have a cap of EUR600 million in terms of capital under management because of liquidity constraints.

The global multi-strategy absolute return fund will use a full-range of plain vanilla OTC and exchange-traded derivatives, and will steer away from exotics, Stadlmann said. The derivatives used could include total-return swaps, forwards, credit default swaps and fx options. It will have a target annual return of 11.5% and have an average of five-times leverage. Frank Naylor has been selected as the fund manager. He has been product cio of multi-strategy absolute return funds at WestAM since 1999.

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