Investment - Threadneedle 'hedges' its bets

Investment manager, Threadneedle, has launched a new hedge fund - the Threadneedle Asia Crescendo Fund designed to combine the firm's involvement in Asian equities with its experience in running equity long-short portfolios.

Two main beliefs underpin the rationale for the launch. The first is that Threadneedle sees a long-term trend developing whereby capital and wealth is transferred from developed to emerging markets. Asia is a key region in this equation and the trend is expected to create many investment opportunities, both long and short.

The second is that the firm believes the Asian-ex-Japan equity markets to be structurally inefficient, characterised by incomplete analyst coverage, poor corporate governance and weak capital markets. Again, there are opportunities that can be exploited.

The fund is managed by Jan de Bruijn, a senior manager on Threadneedle's Far East and Asia Equities team.

Explaining the fund's approach, de Bruijn says: "Due to the sheer scale of the region, analyst coverage can be patchy beyond the well known names, and this provides a fertile hunting ground for us, given our emphasis upon primary research and fieldwork.

"In the course of this research we find lots of valuation anomalies in the region. The long-short structure increases our ability to turn those anomalies into alpha for clients."

Shorts will be used for four main purposes: As a risk control mechanism to hedge regional and sector risk inherent in long positions; to provide additional funds for extending longs; to benefit from expected changes in relative value between stocks and to benefit from absolute falls in share prices

The fund will have a variable directional bias, allowing it to switch between net long and net short according to market conditions. There will, however, be a general long bias, reflecting the team's belief that Asian equities are in a secular uptrend.

18 March 2008 © Moneyextra.com

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