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25 Jan, 2008

Published: 10:40 Friday 25 January 2008
By: Nicholas Paler, Investment Reporter

Cazenove Capital Management is planning to bring the shorting skills of star income manager Tim Russell to bear on the retail market.

The firm aims to launch two absolute return focused funds managed by Russell and his former HSBC Investments colleague Chris Rice respectively, who handle the firm's existing UK Growth & Income (Cazenove UK Growth & Income A Inc) and European (Cazenove European A Acc) funds.

Russell would take the helm of the UK equities fund while Rice would run the pan-European vehicle.

Since 2003 Russell and Rice have run a range of Cayman-domiciled hedge funds which can also be accessed through Cazenove Absolute Equity, (CAEC) a closed-ended fund of hedge funds.

Cazenove's managing director of specialist investment management, Robin Minter-Kemp said the firm wanted to replicate the managers' objectives, expertise and experience on those funds within an Oeic structure.

'There are some operating issues to resolve, but ideally we are looking to offer the products to the market at the end of the second quarter, and crucially for the fund managers it should be portfolio construction as usual as we are trying to replicate what they already do in a different wrapper.

'Their existing hedge funds are targeted to achieve 10% net return each year with approximately a third of market volatility. Their track record in risk and return is well suited if repeated within the Ucits III investment powers, and by doing this we would be offering our hedge fund skills to the wider market.'

If the funds were launched they would likely be compared to Mark Lyttleton's Blackrock UK Absolute Alpha fund, which has captured the imagination of advisers since its launch into the retail market in 2005.

Lyttleton's fund uses derivative techniques to take both long and short positions on stocks, offering retail investors the chance to exploit opportunities in both rising and falling markets.

It has already taken inflows of £377m as of the end of December 2007, with that figure set to rocket in the coming year as investors seek a solution in more turbulent markets.

Minter-Kemp said Cazenove's planned offerings would allow advisers and the discretionary market to look outside the life industry and the cautious managed sector for defensive funds, as well as appeal to retirees looking to protect wealth and gains made in the bull market.

'Most people want wealth preservation when they retire, and absolute return products are ideal for that,' he said.

Final details remain unconfirmed about the products, but Minter-Kemp said Cazenove was considering domiciling the funds in either the UK or Dublin.

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