Threadneedle UK Extended Alpha Fund

Threadneedle has this week launched the Threadneedle UK Extended Alpha Fund, managed by Chris Kinder and Simon Haines.

The fund adds to Threadneedle's strong range of UK equity products and uses UCITS III sophisticated tools to help the fund in its aim to outperform the FTSE All Share Index.

Threadneedle believes that over time the UK and European markets will follow the US, where extended alpha type products are experiencing high demand. The Threadneedle UK Extended Alpha Fund sits alongside the Threadneedle American Extended Alpha Fund and the Threadneedle Global Extended Alpha Fund. All three of these funds use sophisticated UCITS III powers to instigate short positions but, unlike absolute return products, keep their net exposure to the market at 90-105%. The maximum position that they will take is 150/50. By using short positions as well as long, the fund managers can identify additional sources of alpha and benefit from any negative views on stocks.

The portfolio is benchmarked to the FTSE All Share Index but will be fairly focused with around 40-50 long positions at any time (and therefore up to 20-25 short positions). The managers intend to keep the fund diversified by sector and capitalisation, but to focus on delivering outperformance via stock selection.

Simon Haines also manages the Threadneedle Mid 250 Fund which has delivered top quartile performance over 1, 3 and 5 years. Chris Kinder joined Threadneedle earlier this year to add to the team's long/short capabilities and is co-manager of Threadneedle's UK Absolute Alpha Fund which was launched in September.

The Threadneedle UK Extended Alpha Fund is a conversion from the Threadneedle UK Accelerando Fund.

Commenting on the fund, Chris Kinder, fund manager said: "The core competency of Threadneedle is bottom-up stock selection based on rigorous fundamental analysis.  The fund's extended alpha investment strategy should allow us to deliver more alpha by not only picking those companies that will outperform, but also using any negative views we may have on a company to add to returns via the short book.

"The UK equity market has rallied strongly during 2010 and we believe that the market will continue to deliver good returns through 2011. Valuations of UK equities are currently compelling and many companies are in good health with strong balance sheets. In addition we expect M&A to continue. Our bottom-up approach to stock picking should serve us well against this backdrop."

Gary Collins, Head of UK Wholesale Distribution said: "We already have a strong franchise in the UK equity space with a range of funds encompassing a number of strategies. The Threadneedle UK Extended Alpha Fund adds a further investment approach for index benchmarked funds and fits well with the investment capabilities of the desk. Both Chris Kinder and Simon Haines have been managing UK equities for a number of years and between them they have managed across the FTSE 350 market cap and have experience of managing concentrated portfolios and long / short strategies."