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August 19, 2002 at 08:00 PM
DUBLIN, Ireland (HedgeWorld.com)–Appleton Capital Management is planning to launch a fixed-income arbitrage fund on Sept. 2, the first non-futures hedge fund strategy to be open to outside investors at the firm, which until now has focused primarily on currency programs.
The Cayman-based Appleton Fixed-Income Opportunities Fund will run by Stephen Lane, formerly a fixed-income prop-desk trader at ABN AMRO. A discretionary trading fund, it will aim for mild double-digit returns combined with intensive risk management to keep portfolio volatility firmly in check. It will be U.S. Dollar denominated with a standard fee structure of 1% and 20% with a minimum investment of US$500,000.
“This may be the first hedge fund of its kind from Appleton, but what we can bring to the strategy is risk-management expertise from a portfolio perspective,” said Appleton’s Jeremy O’Friel. “Of course, fixed-income is not the same as our systematic currencies program so the actual approach will be different. But the goal is to bring the same high-level of risk management that we’ve become known for,” he said. He thinks the new fund will have the strongest appeal among high-net-worth investors and funds of funds.
David Walsh, managing director at Appleton, will be providing general risk management oversight.
In order to make the strategy more appealing to conservative investors, the new Appleton arb fund likely will be steering clear of the junk bond and high-yield area entirely. Portfolio picks are expected to be made from investment-grade names. The fund will focus on pairs trading based on a relative value.
Appleton, which currently oversees assets of about US$105 million, is expecting to raise a modest US$15 million to seed the fund. The firm is expecting a gradual build up of assets that would hit the US$50 million mark sometime next year. The eventual goal would be to bring the fund to the US$300 million range before possibly capping it.
