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New OM Fund Fee Structure Aims to Lure Institutions

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LONDON (–Old Mutual Asset Managers has announced the launch of the Old Mutual Spectrum Plus Fund, the latest offering from its multi-strategy products team. The new fund will target higher than average returns while maintaining careful control over its risk profile.

The fund will be run by Richard Tomlinson, a specialist in the construction and management of hedge fund portfolios. Mr. Tomlinson has been with the Old Mutual Group since 2002 and with Old Mutual Asset Management since May 2004. He was the architect of the process now used by the Old Mutual multi-strategy products team, which he heads.

OM Spectrum Plus is intended to complement the team’s two lower-risk products, the OM Multi Strategy Fund (to be renamed OM Spectrum, subject to shareholder approval, on the launch of Spectrum Plus), and OM Plus 80. “With our efficient use of leverage, the new fund offers investors the opportunity to access a higher risk budget with corresponding higher expected returns,” said Mr. Tomlinson in a statement. Fund portfolios will include long and short positions in a range of instruments: futures, options, foreign exchange and commodities as well as equities and bonds.

When launched in April, Spectrum Plus will have an initial capital of 25 million pounds sterling. Simon Wilson, marketing director at OMAM, said there is as yet no date set for the closure of the fund which, he says, has significant extra capacity.

The fund will target returns of cash plus 12%, with an annualized volatility target of 12%. Mr. Wilson said the fee structure to be offered to institutional investors was “extremely competitive.” The institutional share class, which requires a minimum investment of 5 million pounds sterling, 5 million euro or US$5 million, will have no annual management fee. The distributor share class will require a minimum investment of 100,000 pounds sterling, 100,000 euro or US$100,000, and will carry the option of an initial charge of up to 3% payable to the adviser or an annual management charge of 1% plus a 0.5% “trail.” The performance fee will be 10% over LIBOR for both classes, with a high water mark.

“Our management account platform gives our multi-strategy team real transparency with respect to the underlying positions,” said Mr. Wilson, adding that the platform supports a series of managed accounts, with the managers acting as advisers, allowing for tighter risk management. “On an aggregate basis, our multi-strategy management team can monitor all these accounts continuously and thus make a careful and ongoing analysis of the overall risk exposure,” he said. “The extensive backtesting that we have performed indicates that this is achievable.”

Spectrum Plus will be domiciled in the Cayman Islands and listed on the Channel Islands Stock Exchange. Fund auditors will be KPMG, while legal advice will be provided by the international law firm Simmons & Simmons. BISYS Hedge Fund Services (Ireland) will be the fund administrator.

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