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Eddington responds to market liberalisation plans with UK-listed fund of funds product

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Fund of hedge funds manager Eddington Capital Management has announced the launch of a UK-listed note issued by Nomura International that invests in two of the firm’s funds of funds and is

Fund of hedge funds manager Eddington Capital Management has announced the launch of a UK-listed note issued by Nomura International that invests in two of the firm’s funds of funds and is designed to be eligible for capital gains tax treatment in the UK.

Eddington says the launch is a response to the plans by the UK regulator, the Financial Services Authority, to open up investment in funds of alternative funds to retail investors, probably next year.

‘There is limited choice for investors who are interested in UK-listed high return target fund of hedge funds products, and the proposed regulatory changes are likely to attract more investors to this space,’ says Eddington’s chief investment officer Alex Allen.

‘Our unique proposition gives UK investors access to the best combination of Eddington funds and an attractive high return proposition without using leverage at portfolio level.’

The note will initially invest in Eddington’s two funds of hedge funds, the flagship Eddington Triple Alpha Fund and the Eddington Macro Opportunities Fund. The Triple Alpha Fund, a multistrategy fund of hedge funds that aims to outperform mainstream hedge funds significantly, will be the larger component of the product.

Over the past two years the fund delivered net returns of 21.44 and 16.47 per cent respectively, compared with 10.33 per cent and 10.12 per cent for the HFRI Fund of Funds Composite Index.

The Macro Opportunities Fund focuses exclusively on macro-related strategies and should substantially enhance the returns achieved by the note. The fund has achieved net performance equivalent to an annualised level of more than 30 per cent between its launch last July and the end of February.

‘Nomura is delighted to work with Eddington on the launch of this new note for the UK market,’ says Garry Topp, a director at the London subsidiary of the Japanese bank. ‘Eddington brings both fresh thinking and high returns to fund of hedge funds. We believe the note should be very popular with discretionary managers and institutional investors alike.’

Established in 2003, London-based Eddington is a 50:50 joint venture between the firm’s manager, Glenn Baggley and Allen, and London-listed investment trust Caledonia Investments. The Triple Alpha Fund, which typically invests with between 18 and 25 managers, was launched in September 2003.

Caledonia has taken an active interest in hedge funds since it helped create Polar Capital Partners, which now manages more than USD3.6bn in various single-strategy hedge funds, in January 2001. Recently the investment trust took a 60 per cent stake in Ermitage, which manages more than USD2.6bn in low to moderate volatility funds of funds, through a management buy-out.

The Eddington product was created in partnership with IGS Group, the consultancy and advisory firm established by former HFR Asset Management Europe managing director John Godden, which advises on product design, market positioning and distribution for hedge funds, fund of funds and service providers, and provides technical advice on regulatory impact, market assessment and marketing of funds and investment products.

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