Dutch Asset Manager Draws Up Guaranteed Fund

Robeco Alternative Investments may use over-the-counter derivatives to structure a guaranteed fund of hedge funds it plans to launch in the spring. Edwin Noomen, v.p. in Rotterdam, said the fund is likely to be around EUR50 million (USD42.9 million), have a five year maturity and will be referenced to a portfolio of 15 funds across six categories, including convertible arbitrage and global macro.

Robeco usually uses constant proportion portfolio insurance (CPPI) to provide the guarantee on its fund of funds. In this method a progressively increasing or decreasing amount of capital can be moved in or out of the hedge funds and into money market instruments according to the performance of the funds, Noomen said. This structure allows Robeco to increase leverage from an initial level of 110% up to a maximum of 130%. The asset manager has used CPPI for structuring two seven-year guaranteed funds but is weighing the cost of using instead OTC derivatives.

Robeco will make its decision based on price, which will determine the participation level for investors, Noomen explained. The asset manager will choose counterparties based on price and their tenure in the market, he added.

Robeco Alternative Investments is part of Robeco, which has EUR110 billion under management.