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Hedge Fund May Issue Structured Notes

Wharton Asset Management, a London-based hedge fund, could issue structured notes on the back of its recently launched fund of hedge funds, according to David Shastri, head of alternative fund investments.

Wharton Asset Management, a London-based hedge fund, could issue structured notes on the back of its recently launched fund of hedge funds, according to David Shastri, head of alternative fund investments. He said Wharton would likely approach Bank of America, BNP Paribas, Société Générale or KBC Financial Products to arrange the securities, because all of these banks have experience in this kind of structuring. Still, he said Wharton's fund, the size of which he declined to reveal, would have to grow significantly before it offers structured notes related to the fund.

As for the fund itself, only the seed capital has been invested, with just half of a potential 20 hedge fund managers selected. Shastri said the fund of funds is known as ph7 because it seeks a neutral mix (as in a litmus test). It focuses on relative value, fixed income and arbitrage strategies with low market and style correlation. Wharton has invested in hedge fund managers before but the fund will streamline and focus the effort, he said.

"Wharton is constantly growing and we're looking to put more money to work in other strategies alongside asset-backed securities," said Shastri. The launch of the new fund comes as Wharton is looking to diversify its investments. It already has $4 billion under management, which includes approximately $1.5 billion in its flagship asset-backed securities hedge fund, known as Y2K, and at least $1.8 billion in H2 Finance, a cross between a collateralized debt obligation of asset backed securities and a structured investment vehicle.

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