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Australian bank to invest $400m in U.S. fund of hedge funds

Wednesday, May 25, 2011
Opalesque Industry Update - The asset management division of Westpac Banking’s off-shoot BT Financial Group is set to unveil a new hedge fund portfolio, reported The Australian Financial Review today.

The manager for the new product, the Advance Multi-Blend Alternatives Portfolio, which aims to return between 4% and 5% above the official interest rate (after fees of 0.98% base and 10% for performance), will be U.S.-based Ramius Alternative Solutions.

With an expected capital of $400m, the portfolio comprises 14 hedge funds and a portion “aiming to replicate hedge fund exposures through derivatives.” A third of the fund would not be immediately liquid, but it otherwise offers daily liquidity and will be available on the BT and Asgard platforms for direct investment.

Listed BT Investment Management tried a similar venture in the past with the BT Global Return Fund, but it had to be abandoned in 2008 as U.S. hedge fund manager Grosvenor Capital Management encountered severe redemption freezes. The fund was terminated in 2009.

On a separate note, The Australian reported last week that Australia’s big four banks (including Westpac) may be the target of shorting by global hedge fund managers, following the sector-wide credit rating downgrade by Moody's. Central to Moody's decision was its concern about the sector's dependence on wholesale funding markets, which sits around 40% on average, the paper said. Westpac was thought to be the most vulnerable.

This is not Ramius' first Australian business venture: as the global alternative investment management business of New York-based investment bank Cowen Group, , it entered into a partnership in April 2010 with Perpetual Investment Management, Australia’s largest investment services group, in which it started managing two separate customized funds of funds products.

Ramius is represented by Triple A Partners in Australia.
B. Gravrand

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