Schroders to enter HK retail hedge fund market

Schroders Investment Management plans to launch its flagship fund of hedge funds products in Hong Kong, says Nicholas Chalmers, associate director in the alternative investment group at Schroders in Hong Kong. The move follows regulatory changes last May that opened up the hedge fund market to retail investors in the Special Administrative Region.

Schroders' global fund of hedge fund products, called Blue Star and Blue Sea, were launched in October 2000 and will be open to Hong Kong's retail investors later this year. Blue Star is a long-short equities fund of hedge funds that consists of 21 underlying funds and currently has $50 million of assets under management.

Blue Sea, on the other hand, is a multi-strategy fund of hedge funds comprising 25 underlying hedge funds that cover a range of strategies including, long-short equities, fixed-income arbitrage, convertible bond arbitrage, distressed debt and macro strategies. Currently, Blue Sea has $150 million in assets under management, although Chalmers added that the fund would grow to $180 million by the end of the month. It is initially targeted to close at $1 billion.

Depending on the demand for capital protected hedge fund products, Schroders may also offer a capital guaranteed version of Blue Sea, said Chalmers. He added, however, that such capital protected products come at a price. "Ultimately, protection comes at a cost, so you have to give up some of the upside. That's really a decision that we're happy to leave to investors tomake."

Schroders is currently in the process of receiving approval from Hong Kong's regulatory body, the Securities and Futures Commission (SFC) to launch the products. So far, three retail hedge funds have received approval from the SFC - two from JF Funds and one from HSBC.