Hedging in to an uncertain market

COLONIAL First State will join a host of other major fund managers launching hedge funds when it unveils its Global Diversified Strategies Fund next week.

The move comes at an uncertain time when, according to CFS chief executive officer Chris Cuffe, investors are looking for an alternative investment vehicles and greater diversification within invest-ment portfolios.

Although high-risk invest-ments, hedge funds have grown steadily in popularity in recent years because they aim for an absolute return regardless of the state of the market.

In times when markets begin to dither, hedge funds can become much more attractive than mainstream funds, whose returns do depend on the market.

The new CFS fund has been labelled a “fund-of-funds”, allowing people to invest in a raft of fund managers who will employ four broad strategies to meet the return objective.

The fund will aim to provide an absolute return on a net gains basis of 12 to 14 per cent per annum over the medium term.

One of the strategies listed is the short selling, a favoured strategy among many hedge fund mangers, whereby shares are bought or borrowed at a certain price in the hope the price will fall before repayment is due.

The success of any hedge fund will largely depend on the talent of the fund manager, and CFS has appointed Harcourt Investment Consulting AG, based in Switzerland, to provide advice on the hedge fund portfolio construction, man-

ager due diligence and risk monitoring.

An Australian investment team will be responsible for the ongoing management and monitoring of the fund.

“We believe our relationship with Harcourt and our active approach to managing the portfolio is a key distinguishing feature of our investment process and a strong point of differentiation for Colonial First State,” CFS hedge fund head Damien Hatfield said.

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