GERMANY - The German investment arm of Citigroup has teamed up with a German and an Austrian private bank to launch one of Germany’s first single hedge funds.
The fund, driven by a long-short approach to German equities and European blue-chip stocks, will be offered to institutional investors in Germany and Austria via private placements.
The German private bank Baader Wertpapierhandelsbank AG is acting as portfolio manager while Citigroup Investment Deutschland KAG is doing the back-office administration. Bank Medici in Vienna is in charge of the fund’s sales to institutional clients.
According to Uto Baader, chief executive of the German private bank, the fund is especially attractive to insurers and pension funds “because of its negative correlation with traditional asset classes”.
Baader therefore expects the new hedge fund to take in between €250m and €300m from investors within two years.
The prediction is bold considering that Germany’s hedge fund industry has failed to take off since being created by the government’s investment law of January 2004.
Only a dozen or so hedge funds have been launched in Germany, most of which are fund-of-funds. Other providers of single hedge funds include Lupus alpha and Union Panagora.
Investor demand for German hedge funds totalled €1bn at the end of 2004 and industry experts believe that the figure will at most double this year. Such volumes are far below original projections for the new market.
In a related development, ABN Amro Asset Management said it had obtained regulatory approval to sell in Germany a fund-of-hedge fund domiciled in Luxembourg. The fund, which invests in 20 different single hedge funds, is primarily targeted at retail investors.