Man readies ‘true’ NY-listed hedge fund

By James Mackintosh in London

Published: May 30 2007 20:57 | Last updated: May 30 2007 20:57

Man Group is preparing what is believed to be the first true New York-listed hedge fund, in an attempt by the London-based manager to tap demand from private investors for hedge funds.

A provisional prospectus filed with the Securities and Exchange Commission showed the Man Dual Absolute Return Fund will have a minimum initial public offering investment of just $2,000, widening the access to hedge funds for small investors.

The listed fund follows a series of hedge fund floats in Europe where more than €2.5bn ($3.4bn) has been raised by London’s Marshall Wace, Brevan Howard, Boussard & Gavaudan and RAB Capital. Tykhe Capital, a New York quantitative equity hedge fund, will manage 80-85 per cent of the money raised, with the rest run by Man’s AHL trend- following fund.

The IPO, underwritten by Morgan Stanley, is expected to raise at least several hundred million dollars, although Man refused to say how much it was hoping for.

More than 100 mutual funds in the US are using so-called “130/30” strategies, where they sell short 30 per cent of the net assets, allowing them to buy, or go long, 130 per cent. At least two closed-end funds are taking a similar approach, one describing itself as an “edge” fund, while Highland Capital has launched four fixed income, distressed debt and loan funds, which some regard as hedge funds.

However, lawyers and fund experts said they believed Man was the first to try to list a true hedge fund, employing full long/short strategies as well as leverage and derivatives. “It should be viewed with interest,” said Mark James, director of alternative investments at ABN Amro.

The fees on the fund differ from the usual hedge fund 2 per cent annual fee and 20 per cent of profits. According to the prospectus, it will charge a 4.5 per cent front-loaded fee, and people familiar with the plan said it would also charge 1.85 per cent of gross assets each year, partly because profit-related fees are hard to structure legally. This is equivalent to a 2.78 per cent annual net asset fee on the maximum leverage of 50 per cent of net assets.

Man will announce its annual results on Thursday.

Copyright The Financial Times Limited 2007