Rothschilds expands services

Rothschilds plans to introduce a hedge fund assessment capability service into its portfolio management service in the first quarter of 2001.

Rupert Robinson, who heads up Rothchild's private clients division, has initiated discussion with various third-party groups and individuals involved in alternative asset management, though the format of the new product has yet to be decided.

The service will apply to both its multi-manager product and its private client services.

Robinson said: "As a group, it's a natural extension to our multi-manager range and it's something we are determined to get into. We're exploring whether or not to do it internally, to outsource it or to buy in the expertise.

Robinson confirmed that Robert Burdett and Gary Potter, who head up Rothschild's portfolio management product, will be involved in the development and ultimately the management of the product. Although the project is at an early stage it is clear that new systems will have to be developed to allow for the idiosyncrasies of hedge fund structures.

Rothschild's current process is based on looking at 14 qualitative factors on a weighted basis. In terms of performance, Burdett looks at specific monitoring versus expectations, for instance, looking at what a particular manager and their style is expected to achieve. Sale disciplines are key. A process of style blending and tilting based on macro influences is also followed while at the same time avoiding style drift.

Burdett said: "We have a qualitative and quantitative process that is very robust but with hedge funds there are certain processes that are irrelevant to long-only funds. Our processes need to be adapted. There is a particular need to focus more on due diligence and counterparty risk.

"Hedge funds are a hot topic at the moment but some companies are in danger of jumping on the bandwagon. Most bandwagons are only seen from the back. We want to look at all sides of it."

The hedge fund product will eventually be offered both to the private and retail side of the business.

Robinson said: "Initially, we'll be offering it to our private clients but we believe there is potential demand in the institutional market."