Structured products brokerage Catley Lakeman Securities is gearing up to launch a fund of structured products for discretionary wealth managers in October.
The Atlantic House Fund Management (AHFM) Structured Products Fund is a Ucits IV-compliant fund domiciled in Ireland which will be managed by Catley Lakeman's asset management sister firm Atlantic House Fund Management, which received permission to trade from the UK Financial Conduct Authority last month.
The fund, said Catley, will be run with a cautious return profile although there is a possibility for a more aggressive version to be launched in the near future. It will be available from a minimum investment of £250,000 with the total expense ratio capped at 95 basis points.
"The fund is a short volatility portfolio with the idea of having a relatively low correlation to the equity market (40% to 70%) and will contain structures such as defensive autocalls and reverse convertibles," Catley Lakeman's founder and partner, Russell Catley, told SRP. "We have an offer period of one month in September and we also have the commitment of one the major discretionary asset management firm to market it and will get seed funding through that."
Catley said that the structured products used in the fund will be from the pool of banks the firm uses for its structured products offering - Citi, Rabobank, HSBC, UBS, Nomura, RBC and Credit Suisse. "With Ucits funds you have to meet very strict diversification rules and the products we will embed in the fund will be a mixture of transferable securities and financial derivative instruments from the banks with which we work, as well as some collateral."
The launch responds to demand from the firm's client base, said Catley. "We sold almost £1bn worth of securities every year with similar structured products into the institutional wealth market and family office market, but the direct securities we sell such as warrants and notes are not eligible investments for offshore insurance bonds and some other fiduciary structures, so essentially there are several investment platforms that we can't use with securities as they require a Ucits wrapper," he said. "Clients have asked us continuously if we could package portfolios for securities which we could sell within a fund which is managed on a Ucits basis."
According to Catley, the Ucits wrapper also has planning and tax benefits as well as providing a diversified and balanced exposure to a range of relatively cautious structured products strategies.
In addition, Catley Lakeman has reached an agreement with Parala Capital to manage the securities pool for a macro-thematic hedge fund to be issued by the US firm, also in October. Steven Goldin, a partner at Parala Capital, told SRP that the opportunity for the fund was identified late last year.
"We saw an opportunity to issue a fund to navigate all weather conditions and to diversify investments with a truly macro-economic and liquid approach," he said. "Feedback from high-end discretionary wealth managers showed that there were not enough good offerings in the alternative low-correlation investment space, and the fund sits well with the philosophy of both firms."
Catley also said that the firm will continue its focus on the securities market although it is open to any wrapper to tap into any opportunities the market may offer. "This is a response to an specific need and there may be one or two other funds, but they won't replace the securities business as this is a well-established market, very efficient and has worked very well. In addition, it offers a cheap, liquid and dynamic way to access the markets and there is no reason to wrap something as a fund unless the fiduciary wrapper you are investing through (insurance policy, pension, trust...) requires the use of Ucits structures."