First hedge fund for 2002

Macquarie reckons its new Titan hedge fund, which was launched this week, is just the ticket as it was designed after getting feedback from advisers and stock brokers.

Macquarie International Capital Advisers associate director Jonathan Hall says after the research the group sat down and put on paper "what we thought was the ideal utopia."

The fund that came out of this exercise is "something which is pretty much right on the button of what people want."

The number one feature advisers wanted was a capital guarantee. The second most sought after feature was tax-efficiency.

The closest product to the Titan fund is the range of hedge funds offered by OM Strategic, which is based in Sydney.

OM Strategic have been highly successful at raising money for its OM IP series of funds and its more recent Hedge Plus product. In fact the company says that it gets far better response rates in New Zealand than in Australia.

Hall says the key differences between the OM funds and Titan relate to the capital guarantee, tax, dollar denomination and number of managers.

While OM stick a large chunk of the money it raises (about 60%) into a zero coupon bond to provide investors with a capital guarantee, Macquarie uses what it calls a 'dynamic' guarantee. That is it puts aside money each year to provide the necessary capital.

The outcome of this is that it has more money to invest directly into hedge funds, plus its level of leverage is much lower.

The Titan fund, while an Australian unit trust, is New Zealand dollar denominated (while OM's funds are Australian), plus the closed end fund has a life of 6 years.

Hall says another of the big features is how Titan deals with tax. He says distributions are done by way of bonus units so they are free of capital gains tax. Also it is efficient from an FIF perspective.

The Titan fund is a 'fund of fund' vehicle which uses a large number of managers to look after the money. While there are many different styles of hedge fund investing within the fund, the long/short strategy is the biggest.

Hall says Titan will have more managers than the OM IP funds.

An additional feature of the fund is that Macquarie Finance will lend money to people so they can invest in Titan.