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25 Feb, 2008

Published: 11:32 Monday 25 February 2008
By: Matthew Goodburn, Investment Correspondent

F&C has been forced to find new seed money for its UK 130/30 fund after its own Foreign & Colonial investment trust withdrew its investment following fund manager departures.

The £2.6 billion investment trust (FRCL), managed by Jeremy Tigue, had seeded the fund with £50 million a month after its launch but withdrew the seeding money soon after the departures of rising UK equity stars Makis Kaketsis and Luke Newman at the end of November.

The pair's former Deutsche colleagues Peter Lees, F&C head of UK equities, and Michael Ulrich took the reins of the fund but Tigue withdrew his investment forcing F&C to find a replacement £50 million from a different unnamed internal institutional backer.

Tigue first made the investment from his £2.6 trust into F&C Enhanced Alpha UK Equity last September a month after launch. His conviction in the fund and managers was such that he worked to persuade his independent board to get clearance to include the long-short fund within the alternative portion of the trust's investments.

He told Citywire at the time: 'We felt the concept of 130/30 was interesting and had considered other products, but when we found F&C were launching one it rang our bell because Makis and Luke have a proven track record.'

An F&C spokesman confirmed Foreign & Colonial investment trust's seeding money had been withdrawn from the fund but said it had been replaced by 'a similar amount of money' from within the group's institutional business.

He added: 'This was a case of the trust's board carrying out due diligence because two managers had left.'

The £50 million fund has beaten the market in each of the six months since its launch, outperforming the FTSE All Share index by 4.21% over its first six months helped by overweight long positions in resources stocks.

The fund has been long in oil related stocks since launch with long positions in outperforming stocks such as Rio Tinto, Xstrata and Aquarius Platinum. Short positions in Antofagasta and BHP Billiton which have both relatively underperformed the index have also aided the fund.

It has also been underweight in financials stocks since launch with its only UK-listed long position, Standard Chartered having beaten the index by more than 10% since its initial purchase.

As first revealed by Citywire, former managers Newman and Kaketsis are now running a global special situations hedge fund for absolute returns house Altima Partners.

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