Investment trust pioneer to launch closed-end fund of hedge funds

F&C, whose flagship Foreign & Colonial Investment Trust was the first such investment vehicle of its type, has announced plans to give investors access to a portfolio of hedge funds through a new listed investment company.

The launch, which combines F&C’s investment trust pedigree with the expertise of its dedicated fund of hedge funds business, will deepen F&C’s drive into specialist areas and complement the extension of its closed-end investment range in recent years into areas such as commercial property and private equity funds of funds.

F&C has this week begun pre-marketing of the F&C Event Driven Fund which is being targeted at discretionary private client portfolio managers, institutional investors and investment intermediaries. The company, which will seek a listing on the Official List of the UKLA in the second quarter of 2007, already has capital commitments of £85 million prior to its fund raising exercise.

The underlying portfolio will invest in 20 – 40 hedge funds selected and monitored by F&C Partners, the group’s dedicated fund of hedge funds business. F&C Partners, staffed by a team with experience in trading, risk management and hedge fund selection, will select the underlying funds using a detailed screening, due diligence and face-to-face research process. The funds will be drawn from the “event driven” category of the hedge fund industry which is estimated to account for around 40% of the entire hedge fund universe.

Event driven hedge funds encompass a wide range of investment strategies and styles but broadly target companies which require a catalyst for change such as a significant corporate event (merger, de-merger); the resolution of a major problem (bankruptcy, re-financing or balance sheet restructuring) and other forms of activism.

The F&C Event Driven Fund will target a return of 8 – 12% per annum net of fees with a target volatility of 5 – 8%. The F&C Event Driven Fund will not employ gearing other than for the purposes of managing liquidity in recognition of the fact that the underlying hedge funds will use leverage.

Commenting on the plans, Mike Woodward, Head of Investment Trusts at F&C, said: “The first investment trust launched almost 140-years ago, Foreign & Colonial, was without doubt a radical innovation in that it provided investors with access to investment opportunities that had not hitherto been readily accessible except to the very wealthy.”

“The F&C Event Driven Fund will follow in that same mould, by providing an opportunity to achieve exposure to an increasingly significant class of investment, hedge funds, but through a diversified portfolio based on rigorous specialist selection and with shares in a closed-end company that will be traded on the London Stock Exchange.”