Fund of hedge funds guarantees return of capital

Close fund Management and Man Investments, the hedge fund specialist, this week announced the first fund of hedge funds with a guaranteed return of capital

The Close Man Hedge Fund aims for returns of 13 to 14 per cent a year by investing in hedge funds, but investors who stay in for eight years will be entitled to at least their original money back, without interest. The fund will be quoted on the Guernsey Stock Exchange, so investors can trade its shares at any time. But once a quarter the fund will buy back shares at net asset value, which may be better than the market price.

Marc Gordon, managing director of Close Fund Management, said: "This fund is a first for UK investors because it will meet the needs of people who are seeking absolute returns, with low correlation to equity markets, combined with capital protection." James Jacklin, European regional manager for Man Investments, said: "This partnership with Close enables us to offer hedge fund returns in a format tailored to the needs of UK-based investors."

The fund will invest in a capital guaranteed bond issued by Royal Bank of Scotland, which is designed to ensure the return of the initial capital investment. Unlike many hedge funds, it will be denominated in sterling, taking away the currency risk for UK investors. Mr Gordon said the guarantee allowed Man a selection of managers that can go for higher returns. The fund would be suitable for high net worth individuals who want to put about 10 per cent of their money into hedging, he said.

Although the fund will be available for public subscription, Mr Gordon recommends investors to go through an IFA. Minimum investment is £10,000.