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Derivatives

Gartmore May Tap OTC Equity

Gartmore Investment Management's recently launched long/short hedge fund, named Avior, may invest in over-the-counter equity derivatives. The fund was launched at the start of the month and as of last week had assets of GBP85 million (USD120 million). An official at the fund manager in London said it currently invests only in cash instruments and contracts for differences, but could use equity options. The investment universe for the fund is the FTSE350 and it invests only in U.K. equities and related synthetics.

Douglas Shaw, head of derivatives investments in London, said derivatives are "a valuable thing to have in one's toolbox," as a hedging instrument. However, he said the new Avior fund does not yet invest in the OTC market and is more likely to invest in listed derivatives. "We don't distinguish between on and off-exchange derivatives and I have a strong preference for dealing with on-exchange derivatives," he said, because they are generally cheaper and have greater transparency. He declined to say what other factors might lead the Avior fund to dabble in OTC equity derivatives.

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