Benchmark Plus Launches Fund, Uses Derivatives to Hedge Risk

Jan 13 2006 | 9:35pm ET

Fund-of-hedge funds firm Benchmark Plus Management launched its latest long/short partners fund on Jan. 1. The new fund will invest with around 25 managers employing a variety of strategies, from micro-cap to sector funds, according to Robert Ferguson, a principal at the firm.

Ferguson said the new fund, as well as Benchmark's other funds, are unusual in that managers directly hedge all of their systematic exposure with derivatives. "We try to select managers that provide a return in excess of a unique benchmark that we come up with, and then we hedge that benchmark using derivatives, either options or futures," Ferguson said. "The volatility is very low because systematic risk is taken out, so we are able to reduce the risk of the portfolio much more than an average fund-of-funds could."

The minimum investment in Benchmark's new fund is $5 million, and there is no minimum lockup. Currently, the fund has between $250-300 million in commitments, and aims to close at $1 billion. Ferguson said, "we look at emerging mangers and seasoned managers, although the majority of our managers have less than $300 million under management." Benchmark does seed managers, but Ferguson said that the new fund has not yet invested with any first-timers.

 

 


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