On Wednesday 18 September, three funds will make their debut on ASX. The manager of all three, Absolute Capital, will become the first to list this type of product in Australia, providing for an investment strategy that has proved extremely popular in overseas markets and is expected to be so here.
Hedge funds have attracted additional investor interest in the current market environment due to their potential to generate positive returns in both rising and falling markets. Funds management analyst Rainmaker estimates that $1.9 billion was placed in Australian hedge funds in the March quarter, up from $540 million in the September quarter 2001.
The US hedge fund market is currently estimated at US$270 billion - almost the same size as Australia's domestic equity market capitalisation. (However because of different taxation and other regulations the US hedge funds are less likely to be listed.) Other exchanges with listed Absolute Return funds include London Stock Exchange, Irish Stock Exchange, Kuala Lumpa Stock Exchange and Euronext.
Absolute Return Funds can employ a variety of investment strategies ranging from the very conservative to aggressive. It is a misconception to assume hedge funds as being solely concerned with high-risk speculation on currency values, volatile markets, interest rate movements and commodities.
Listed Absolute Return funds allow investors access to the benefit of a live market - the ability to buy and sell opportunities immediately, as opposed to the traditional funds' application and redemption practices, which tend to be measured in weeks or months.
Transparency is also enhanced because investors can value their investment on a daily basis and the funds must make regular reports and disclose any material event which could impact on the value of an investor's holding..It was the introduction of these two basic market characteristics that helped the Australian property management industry become a world leader, through the successful development and expansion of ASX-listed property trusts.
ASX is recognised as an innovator in exchange traded products, including Warrants, LEPOs, ETFs, and Futures. Offering Absolute Return Funds will further enhance the range of supervised investment products available to advisors and investors.
