05. July 2011

Merchant Capital to expand Ucits hedge fund platform

Hedge Funds Review

Merchant Capital’s Ucits platform is to take on five hedge funds by October 2011. The first is Spectrum Partners’ Russian Phoenix Ucits Fund, which follows a long/short equity strategy. The rapid expansion of Merchant Capital Ucits platform with the addition of five hedge funds by October this year will bring the total number of products on the platform to eight. Collectively they will represent a total of €350 million ($504 million) in assets under management (AUM). The first of the funds to join the platform, the Russian Phoenix Ucits Fund, launched on June 2 with $40 million AUM. The fund replicates the strategy of the existing equity long/short Spectrum Russian Phoenix Fund managed by Spectrum Partners Group. The offshore fund has a two-year audited track record. It follows a thematic investment approach with active stock-picking. It predominantly invests in large-cap equities traded in the markets of states of the former Soviet Union. The Russian Phoenix Ucits Fund will have weekly liquidity and is available to institutional and retail investors in US dollar, euro and sterling share classes. Minimum investment is $/€/£100,000 for institutions and $/€/£20,000 for retail investors. The co-founders of the asset management division of Merchant Capital are Christopher Day and George Cadbury. Both were previously at PCE Investors, a hedge fund incubation platform, which had AUM of $2.5 billion at its peak in 2008. Day was a founding partner and chief executive while Cadbury was president and head of business development. PCE Investors was sold in the summer of 2008. Cadbury launched the Ucits platform in 2009 with just one Ucits hedge fund, the Merchant European Equity Fund from Tressis, a Spanish independent distributor of investment funds, structured products, fixed income and other financial products. Tressis has over €1.7 billion ($2.44 billion) of assets under distribution. According to Cadbury, the Ucits platform's competitive edge stems from its automated pre-trade compliance checks. This ensures managers know whether a trade is Ucits-compliant before a breach takes place, he said. This, he believes, is preemptive of further Ucits hedge fund regulation that could come out of the EU as "European regulators are not huge advocates of hedge funds". There may be extra measures and controls in future, Cadbury added. The platform will be of most interest to managers with esoteric strategies, Cadbury claimed. Its aim is to build a diversified portfolio of non-competing funds covering a wide range of strategies, he added. Other funds on the platform include the Merchant Global Resources Fund, added in October 2010, and the Merchant Galaxy China Absolute Return Ucits Fund, added in June 2010. Merchant Capital has distribution agreements with regional specialists who have relationships with allocators in Germany, France, UK, Scandinavia, Austria, Spain and Switzerland. It also has a number of independent financial advisor (IFA) networks in the UK which Cadbury believes is an important bridge between the retail investor community and the Merchant Capital's onshore hedge funds. PNC Global Investment Servicing is providing administration, custody and trusteeship services for funds on the platform. Merchant Capital is owned by Merchant House Group, a corporate banking and financial services group and a London Stock Exchange AIM-listed holding company. The group is involved in corporate finance, asset management, trading infrastructure and private wealth management and has approximately $2 billion in affiliated or direct client assets or assets under advice. Link: http://www.hedgefundsreview.com/hedge-funds-review/news/2086111/merchant-capital- expand-ucits-hedge-fund-platform

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