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Barclays Capital announces note linked to fund of hedge funds

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Barclays Capital, the investment banking division of Barclays Bank, has announced plans to launch a note linked to the US Opportunities fund, a US-focused equity long/short fund of hedge f

Barclays Capital, the investment banking division of Barclays Bank, has announced plans to launch a note linked to the US Opportunities fund, a US-focused equity long/short fund of hedge funds managed by Optimal Investment Services, a subsidiary of Spain’s Banco Santander.

The note, dubbed Simple, will give investors access to Optimal’s expertise in US hedge fund managers of all equity-based styles – trading, equity hedge, special situations and sector specialists. The USD610m fund of funds is run by New York-based senior portfolio manager Balkir Zihnali, who has ten years of experience in hedge funds.

The Barclays Capital note is aimed at discretionary private client managers and fund managers in the UK. Performance is linked to the Optimal US Opportunities Ireland GBP class, which has a track record dating back to 2002. The fund, which takes a concentrated approach, is currently the only equity long/short fund of funds available via a Barclays’ note.

According to Barclays Capital, the note provides investors with exposure to the performance of Optimal US Opportunities, an equity replacement product with defensive exposure to US equity markets. If investors are subject to UK tax, gains on the note are expected to be taxable as capital gains, and the note is available for PEP, Isa, Ssas and Sipp investment

Daily liquidity is provided by a third party, with liquidity in small sizes available on a matched basis under normal market conditions, a potential enhancement compared with the underlying fund liquidity.

‘This is the latest of a successful and growing number of launches of hedge fund-linked notes,’ says Alex Robinson, head of Barclays Capital Investor Solutions.

Ben Whitfield, senior vice-president of business development for Santander in London with responsibility for distribution of Optimal’s products in northern Europe, adds: ‘We are delighted to be the first to offer UK private client managers and wealth managers a US equity long/short fund of funds in note form. In our view, Simple offers the only viable structured alternative to a closed-ended fund in the UK.’

Simple is a medium-term note issued from a Barclays Bank structured note programme. The bond is AA-rated, unsecured, unsubordinated, and ranks equally with all other bondholders.
The bond will have a 10-year-term and the value will exactly match the value of the Optimal fund. The note is not considered a derivative and so can be held within portfolios as a normal transferable security.

Optimal Investment Service has its main office in Geneva, with an affiliate in Madrid, and offices in London, New York, Singapore and Tokyo. It manages USD9.4bn in a combination of single-strategy, multi-strategy and discretionary funds of hedge fund, and has been analysing hedge funds in the US for the past 10 years. Barclays Capital is the investment banking division of Barclays Bank, which has an AA long-term credit rating and a balance sheet of more than GBP1trn.

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