NU Online News Service, Mar. 7, 12:15 p.m. – So what is a traditional investment advisor like Phoenix Investment Partners Ltd., Hartford, doing teaming up with a hedge fund advisory firm like LJH Global Investments LLC, Naples, Fla.?
Making hedge fund choices available to the ordinary individual investor, according to Donnell Segalas, chief marketing officer in the Phoenix alternative investment division
“Most people simply don’t have the skills, contacts, requisite information sources to do proper due diligence on hedge funds,” Segalas says. But “we think, if properly positioned in the alternative allocation of one’s portfolio, hedge funds can make sense.”
Phoenix, a unit of The Phoenix Companies Inc., announced plans earlier this week to expand hedge fund access by working with LJH to develop a “registered fund of hedge funds,” which will have much more flexible investor requirements than the typical hedge fund.
A hedge fund is a fund that buys unusual types of assets, such as distressed securities; adopts unusual investment strategies, such as hedging against market downturns; or makes heavy use of swaps, derivatives and other sophisticated financial tools, according to the Hedge Fund Association, Washington.
Because the typical hedge fund is not registered with the U.S. Securities and Exchange Commission, federal laws meant to protect small investors sharply limit its scope. The typical U.S. hedge fund can accept cash from only 100 sophisticated U.S. investors, and those investors must usually contribute at least $1 million each.
Because the fund that Phoenix wants to set up with LJH would be registered with the SEC, it could open to more investors and set a lower minimum, Phoenix says.
LJH will develop and manage the fund of hedge funds, and Phoenix will market the fund to wealthy indiviuals through its investment and annuity distribution systems, Phoenix says.
“We think we will create a pretty good partnership by teaming up with one of the leading hedge fund managers,” Segalas says.
This is not the first time Phoenix has ventured into the hedge fund market. In June 2001, Phoenix joined with Arden Asset Management, New York, a hedge fund manager with more than $2 billion in assets, to develop and distribute a fund of hedge funds for institutional investors. Arden manages the fund and Phoenix distributes it.