BT adds hedge funds

One of the outcomes of the BT Funds Management/Sagitta get together is that BT will start promoting alternative investment funds in New Zealand.

Sagitta, formerly known as Rothschilds, runs two hedge funds in Australia and these will now be promoted more actively in New Zealand.

Also, the group is looking to develop other alternative investments such as private equity or investments in the physical commodity area.

Sagitta's head of alternative investments Richard Keary says one of the things which differentiates his hedge fund from others in the market is that it doesn't have a capital guarantee.

Because there is a cost to having a capital guarantee the manager has to look at it from a cost-benefit angle.

He says capital guarantees are suitable for volatile funds.

"The Global Return Fund has very low volatility - it just doesn't need a capital guarantee."

Keary says there is a place for capital guarantees, however it is not necessary to use one on his fund.

Keary acknowledges that although hedge funds have been the "hot" product for a number of years, money hasn't poured into the area.

"There have been other fads which people have embraced much more expansively (than hedge funds)," he says. "Therefore they were hurt more when the fad blew up."

He suggests the slower take up rate may be to do with financial shocks that have hit the markets such as the tech bubble, Enron and WorldCom.

Investors and advisers have been "very sober and conservative in their take up" of hedge funds, and "that's the way it should be."

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