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Collins Stewart FM echoes FSA warning on “hedge fund lite” providers

Tuesday, February 09, 2010
Opalesque Industry Update – Collins Stewart Fund Management welcomes the recent warnings from the FSA over hedge fund managers' ability to manage funds within the UCITS framework. As the universe of funds increases it becomes more and more difficult for fund pickers to identify those managers that will cope with the UCITS restrictions and therefore, turning to a fund of absolute return funds, managed by a team of experienced hedge fund selectors, to achieve the sector exposure could be the answer.

Recent debate sees the industry split over the ability of hedge fund managers to manage versions of their portfolios within the UCITS restrictions. Managing a fund with certain regulatory restrictions on types of investments as well as daily or weekly liquidity requires a very different skill-set to one which has a longer liquidity profile, lock-ins and the ability to impose a gate, if necessary.

Aside from the ability to cope with the liquidity requirements, professional advisers must also remember that absolute return funds do have the ability to short the market, albeit synthetically, and, despite the reduced number of strategies allowed within the UCITS framework, many of the funds that have launched recently are, for all intents and purposes, hedge funds.

Mike Brown, Head of Fund Sales at Collins Stewart Fund Management said, "We are excited that fund providers have reacted positively to the rapidly increasing number of investors acknowledging the need for a focus on Absolute Returns, however, we do have a number of concerns; there will always be good and bad managers in any universe and buying an absolute return manager will far from guarantee investors positive returns. Hedge fund selection is a highly sophisticated exercise, and we believe that exactly the same applies to Absolute Return products, and that caution must be applied. Turning to experienced hedge fund pickers with a proven track record is a potential solution.

The Collins Stewart Alternative Strategies Fund was the first daily dealing, UCITS III Fund of Absolute Return Funds and we are seeing a lot of interest from advisers who recognise the need to outsource their decision-making for this particular asset class."

Collins Stewart Fund Management (“CSFM”) is a multi-investment boutique focused on delivering investors high quality investment returns in selected asset classes. The group manages over £302m (as at 30-Sept-09) across the equity, fixed interest, multi-asset and fund of hedge fund asset classes. More information on CSFM is available at Collins Stewart plc is a leading independent financial advisory group listed on the London Stock Exchange.


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