Hedge Fund-like Funds

Hedge-Fund-like Funds

In The Sunday Times of 16 August 2009, senior correspondent Lorna Tan featured a fund available to retail clients a hedge fund like fund for investors to consider.

What hedge-fund-like fund was she referring to? It is called Fulcrum Portfolio by New Independent. This hedge-fund-like fund gives investor access to more than 1600 exchange traded funds ETFs traded on 22 exchanges around the world.

It is considered like a hedge fund because the fund allows the managers to go long and short on exchange traded funds to avoid singe-stock risks and achieve some degree of diversification.

'Going short' refers to the strategy of using inverse exchange=traded funds ETFs to make money from a declining asset value. Inverse ETFs rise in value when underlying asset value falls.

Investors with S$1 million to spare, can access this hedge-fund-like fund through a discretionary wrap account. Those with S$100,000 can use the alternative advisory wrap account to invest in this hedge fund like fund.

The fund's target annual return is about 10 percent in Singapore Dollars. The annual management fee is 1 per cent to 1.65 per cent. The performance fee is 15% of portfolio returns, subject to certain conditions.

This fund has features of investing in a hedge fund. It is supposed to come with more control, transparency and lower costs because the underlying instruments are lower-cost ETFs sourced globally.

This hedge fund like fund is not accessible to the mass market because of the high minimum investment sums. It also carries potential currency risks as the hedge fund like fund is denominated in US dollars.

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