Thursday, 29 September 2016
Last updated 15 hours ago
Apr 18 2007 | 10:29am ET
If investing in funds of funds is your cup of tea, one new firm would like to interest you in a fund of funds of hedge funds. Global Vision Investments, a Cayman Islands-based investment advisor, is betting that investors who just can't seem to get enough diversification in their portfolios would gravitate toward its first hedge offering, dubbed Dynamite F3. The vehicle, which was originally set to launch in February, is finally getting off the ground on May 1 with some $30 million in initial equity.
Dynamite F3 will invest in a globally diversified portfolio of 12 to 15 funds of funds, as well as five to eight single-strategy funds, according to Global Vision's co-founder and portfolio manager . While the new offering has a diversified mandate, it is wary of option-selling strategies, specifically Standard & Poor’s 500 option sellers, and will not allocate capital to the sub-strategy. "I think this is quite a dangerous strategy and we have seen this during in February and March," said Bühler.
"We're also looking to not be overly exposed to long/short equity because I think we might see corrections in the stock market later this year, and long/short equity and option sellers might get hit by such events."
According to Bühler, while some investors have been lukewarm to the idea of paying additional fees for diversification, others have shown interest. "Obviously, there are people who question funds of funds, but the ones who have seen our presentation have been quite interested in it," he said.
"Many people ask us about the additional layer of fees,” Bühler notes. “We have two answers to that: First I think one should look what he gets after fees, and our product looks quite appealing with a target annual return of 20% with a volatility similar to bond investments. Secondly, we are able to make it even more attractive by negotiating better fee terms with the target funds and rebating it to the fund and so to the investors. This will offset the biggest portion of the fees charged by ourselves."
Those fees are 1% for management and 10% for performance, with a US$100,000 minimum investment requirement.
While Buhler and his partner, Steven Butlin, are currently busy marketing their F3 product, the pair is also contemplating launching a CTA fund of funds sometime down the road. "There aren't too many good products out there within this area because CTAs have not done so well lately, but we still think investing in CTAs have advantages because during the Asian crisis and the LTCM crash they were the only strategies to make profits, and there is definitely some talent there as well," said Bühler.