LONDON (HedgeWorld.com)–Man Investment Products, a unit of Man Group plc*, began selling a hedge fund structured bond with a capital guarantee set at 120% of the amount invested.
The bond, Man IP 220 Series 4 Ltd., also offers the potential for an even higher guarantee, depending on performance over the life of the bond, which is 11 or 12 years. The fund was launched Aug. 26 with the goal of earning returns of 17% to 18% a year with volatility of 14% to 15%.
Lloyds TSB plc, London, is providing the guarantee, which is in effect at maturity of November 2013 for the U.S. dollar bonds and November 2014 for euro bonds. As Man has done with previous IP 220 issues, the investment will be divided between the futures-focused Man-AHL Diversified offering and a Man-Glenwood multi-strategy, multi-manager hedge fund portfolio. Glenwood, based in Chicago, also is a unit of Man Group.
The bond is registered in Bermuda and will be sold in increments of 50,000 bonds, be it in dollars or euros. There is no sales charge, but there are early redemption fees of 4%, 3% or 1% if the bond is redeemed before Nov. 30, 2008.
The management fees are roughly 3% annually and 20% of profits, depending upon which advisers are used in the hedge fund portion of the portfolio. The fund also charges a 1% annual principal guarantee fee.
IP 220 Series 4 will be sold through Oct. 4, though the period could be extended, according to Man. Hemisphere Management Ltd. is the fund’s registrar.
Man Investment Products manages US$21 billion. The firm recently registered a fund with the Securities and Exchange Commission as part of its effort to expand in the United States. In May, Man purchased the hedge fund of funds manager RMF Investment Group, Pfaffikon, Switzerland, a manager of US$8.5 billion.
*Man Group plc is a minority investor in HedgeWorld.