The past year has been “a highly competitive season” for listed, closed-ended hedge fund offerings, observed Ana Haurie, managing director of Dexion Capital.
Dexion Absolute, which has provided direct access to Harris Alternatives’ Aurora range of funds since December 2002, completed its fifth capital-raising last September, locking in a further £229m (€336m) from investors, including its first from Latin America and Australia.
Two months earlier, multi-strategy fund of funds CMA Global Hedge PCC set a London record for its $402m (€300m) listing, only to see it smashed by the $507m listing of Goldman Sachs Dynamic Opportunities. Then, in November, the Goldmans alumni at Boussard and Gavaudan weighed-in with a €440m Amsterdam listing investing in its arbitrage-focused Sark Fund. Most recently, Brevan Howard offered London’s first single-manager listing with BH Macro: it failed to hit its e1bn target, but the €770m it did raise is nonetheless testament to the demand for these vehicles.
“A year ago we started to see the average transaction on exchanges go from £50m to £250m,” said Mr Hopkins. “The industry suddenly woke up to the fact that people are really buying these things. The problem is that the notion of permanent capital has lured in lots of people who only want to trap capital for riskier or longer-term strategies.”
Any liquidity mismatch between the underlying and the exchange is usually reflected in the securities trading at a discount to fund net asset valuation.
The Market Wizards Fund is focused on traders in liquid securities for precisely this reason, said Mr Hopkins. However, he feels that the unique managed-account structure will offer an even more compelling prospect.
Because custody of assets and securities remains with the Market Wizards Bermuda-based trust (and not with the 25 underlying managers), HFR Asset Management, which provides the accounts platform, has a live view of every security and derivative in the portfolio upon which to base its daily valuations.
Critics would suggest that “self-selection” in managed accounts (one can only invest with managers who offer managed-account terms) dents performance. Mr Hopkins points to the Market Wizard Fund’s 12.4 per cent annualised return over the past 10 years, achieved with equity exposure of less than 10 per cent net, arguing that this is partly an efficiency gain over wiring money to multiple offshore companies which present a variety of often punitive liquidity constraints and penalties.
MS
