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“We have been sounding out the smaller local authority marketplace and have recognized a demand for a diversified alternatives unit trust” |
Bramdean Asset Management, the proprietor of closed-ended fund Bramdean Alternatives, is planning to launch a new, open-ended fund of alternative assets. Bramdean, with total assets of $258 billion as of August 2007, recently returned client money invested in other assets to focus on alternatives, and the new fund is a way to let investors unable or unwilling to invest in an unfamiliar closed-ended fund to access this asset class. This includes smaller funds and other investors with lower capital levels. “We plan to have a low minimum investment,” says Nicola Horlick, chief executive of Bramdean. “The open-ended structure is more familiar to private clients and IFAs than our Bramdean Alternatives Limited, which is listed on the London Stock Exchange.” The fund idea is in its early stages but Horlick is planning to use a Ucits III structure. As a Ucits III, the fund will be able to invest in a whole universe of quoted stocks but will remain focused on a limited number of select investments. “We are aiming for a concentrated portfolio of approximately 30 stocks, including an investment in Bramdean Alternatives Limited,” says Horlick. “The portfolio will include private equity, hedge funds, management companies, infrastructure and environmental stocks.”
That the fund will invest in Bramdean’s own closed-ended fund could be seen as a sign that Bramdean is not attracting the levels of investment into this fund that it would like. But Horlick, whose investment calibre is highly regarded from her time at Deutsche Bank and Société Générale, is determined to promote investment in alternative assets from investors previously unacquainted with them. Horlick has singled out the UK pension fund industry as being particularly light in alternative assets, at around 3% of its invested capital, but notes that these pension funds all have more funds earmarked for alternative investment. If so, that 3% figure will probably rise, and soon. “We have been sounding out the smaller local authority marketplace and have recognized a demand for a diversified alternatives unit trust,” says Horlick. “This fund will be a stepping stone for smaller local authorities looking to invest in alternatives for the first time or for those that would like to increase their exposure but have limited knowledge of the sector.”
Bad timing?
A large proportion of the fund’s selected investments will be listed hedge funds, such as KKR. But some have questioned the wisdom of this strategy. Not only are there few listed hedge funds, limiting diversification, but in light of the recent lean spell at such funds this might not be the best timing. Some hedge funds have had to pull out of planned listings, such as AQR after double-digit losses in October. Many of those that are already listed have had similar problems, such as GLG, whose share price dropped some 30% over recent months. These difficulties have stifled liquidity at such funds. “Fundamentally, the track record of listed hedge funds has not been stellar,” says Talbot Stark, global hedge fund relationship manager at BNP Paribas. “I’m not sure that this is the most attractive vehicle to get involved with. Don’t think that just because a hedge fund is listed, it is liquid.”
Nevertheless, Horlick is committed to attracting new investors to alternatives. Speaking at a conference in London, she said: “We are trying to expand people’s horizons, to get them to diversify and give them access to better returns,” she said. “The world is in a dire place but, when things go horribly wrong, there is opportunity.”
