Portland, Oregon-based Bandon Capital Management will launch its first mutual fund, a long-short fixed income vehicle called the Bandon Isolated Alpha Fixed Income Fund.
The long-short fund will launch in early January and will seek to profit from both rising and falling interest rates by taking both long and short positions.
The fund will use two institutional managers: New York-based Dix Hills Partners, a $1 billion firm focused on active duration strategies in U.S. Treasury and other sovereign debt markets and Philadelphia-based Logan Circle Partners, an $11 billion firm focused on absolute return, duration neutral credit strategies.
Mutual funds employing hedge fund strategies are a new but growing phenomenon, according to Bandon. This category of funds attracted $12 billion through August 2010. The Morningstar research company has created a new category to capture the trend—the Alternative, long-short category, which currently counts 119 distinct funds, 49 of which have been launched since 2008.
“Many investors have recently fled their core fixed income allocations in favor of floating rate investments, high yield bonds, and or dividend paying stocks,” said Bill Woodruff, Bandon founder and president. “We view these as significant asset allocation decisions and are looking to provide a new and innovative option to investors looking to reduce the buy and hold risks within their fixed income portfolios.
“It appears the 30-year bull market for bonds may be coming to an end and we believe that allocating to fixed income strategies like ours, that have an absolute return orientation, could prove to be timely.”