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Portfolio > Portfolio Construction

S&P Sees No Knock in Octane Fund Series

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BRISBANE, Australia (–The terms of HFA Asset Management’s “Octane” series might sound a little risky, but while it does employ leverage it also carries capital protection.

The HFA Octane Series 2 opened March 21 with an offering period that lasts through June 10. The closed-end unlisted unit trust already has been given an investment grade rating by Standard & Poor’s, evaluated the underlying fund of funds managed by Lighthouse Partners LLC, Palm Beach, Fla.

The Lighthouse Partners portfolio, the LHP Fund, is a portfolio of 62 hedge funds that invest across 11 broad hedge fund strategies. The US$4 billion firm uses sophisticated proprietary financial modeling tools in the management of portfolio risk.

“We concur that a grouping of hedge fund strategies based on performance behavior characteristics is desirable,” said Greg Hogan, S&P fund analyst, in a statement. “We believe that retail investors deserve clear classifications–even if stylized–giving them useful summary information when they are contemplating investment in a portfolio of hedge funds.”

S&P’s classification system is based on returns and risk relative to a traditional long-only investment portfolio. LHP has a 54% focus on risk reductions and 36% focus on return enhancement, according to S&P’s analysis of the fund’s returns, risk and correlations in comparison to a traditional portfolio.

HFA’s survey of Australian retail investors last fall showed that there was keen interest in absolute return strategies. According to HFA’s marketing documents, investors who are remitting directly–through self-managed superannuation funds or via a portfolio service–and/or have a medium-term investment horizon are well suited to the Octane Fund.

The capital protection of the fund is through an option to invest via a capital-protected loan facility from Macquarie Bank for up to 100% of the initial investment. Additional protection can be purchased via a put option from Macquarie Bank.

The investment minimum for the fund is A$5,000 (US$4,105) and the maturity date for the fund is Sept. 30, 2013. Redemptions are quarterly after a one-year lock-up period. An adviser brokerage charge is 2.75%, and an adviser service fee can be up to 0.5%. The management fee is 1.33% of the fund’s gross asset value.

HFA has 12 absolute return funds in total with more than A$750 million in combined assets.

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Contact Bob Keane with questions or comments at: [email protected].


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