Monday, 20 February 2017
Last updated 2 days ago
Feb 23 2007 | 12:32pm ET
A group of former long-only managers from Schroder Investment Management are rolling out their first hedge fund product in April, a U.K.-biased equity long/short fund with between $10 million to $20 million in assets.
The FOUR Absolute Return Fund will employ bottom-up fundamental analysis to pick stocks. Its portfolio will be split between long-term core positions and supplemental active trading of shorter-term positions. The fund will make directional bets, so “we’re not going to going to be managing this to a constant market-neutral stance,” Chris Rodgers, portfolio manager, says. “And where we don’t feel comfortable shorting stocks, we’ll be employing cash, index futures, SWAPS and ETFs as a means of managing our net exposure and volatility.”
Rodgers formed FOUR Capital Partners last year with fellow Schroder alumni Edward Williams and Tom Carroll, as well as Derrick Dunne, former co-CEO of the multi-manager firm MM Asset Management. He admits that the group does not have a track record in shorting stocks, but is unfazed by the inexperience.
“We’ve been asked the question of, ‘Why do you think you can short stocks having come out of the long-only space?’, and the simple fact is, anytime you’re looking to buy stocks, you’re also looking at the downside risks,” he says. “So it is not that difficult to turn that around and buy stocks where things could go wrong. We will be applying a hard-stop loss to short positions at 10%.”
The fund charges a 1.5% management fee and 20% performance fee, with a $100,000 minimum investment requirement. The Irish Stock Exchange-listed fund offers monthly subscriptions and requires 30-days notice for investor redemptions.
It’s not abandoning familiar turf, though: FOUR is also launching two long-only funds next month. The Diversified UK Equity Fund will comprise of 40 to 60 holdings, and is designed to outperform the FTSE All Share over market cycles. The FOUR Focus UK Equity Fund comprises the firm’s “best ideas” in a concentrated portfolio of around 25 holdings.