Bank Leu launches hedge fund of funds

SWITZERLAND – Credit Suisse’s Bank Leu subsidiary is launching three new hedge funds of funds in response to demand from Swiss investors.

The three funds will focus on three separate areas – arbitrage strategies, long/short strategies in US equities and long/short strategies in European equities. Each of the funds is available in Swiss francs, euros and US dollars.

Bank Leu says it is offering the products in response to the increasing trend towards alternative investments. “The negative performance of the equity markets in recent years, coupled with the possibility of a turnaround in the bond markets, renders the wisdom of ‘buy and hold’ strategies questionable to a certain extent. Flexible investment products that enable the investor to generate added value even in a difficult market environment therefore need to be considered as a supplementary strategy,” says Bank Leu.

Investment specialists and an in-depth screening procedure have been applied to the hedge fund of fund universe, as Bank Leu says that “the sharp rise in the number of hedge funds and increasing complexity of the strategies employed” is making the task of selection more difficult.

Consultant Grant Thornton echoed this view this week, and urged investment managers to simplify the products so that pension fund trustees and institutional investors would better understand hedge fund strategies and their benefits and pitfalls.

''The investment management industry has to face the challenge of presenting hedge funds in laymen's terms, with presentation of the downside risks being given equal weight to the advantages,” said John Wilson, senior manager within Grant Thornton.

According to recent research from J P Morgan Fleming Asset Management, as many as one in four European Institutions have recently allocated money to hedge funds and that just over one in three are considering similar investments to try and reduce their pensions deficits.

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