21/07/2010 Author: Tony Griffiths

Paulson and Biggs plan Ucits launches

US hedge fund luminaries John Paulson and Barton Biggs are poised to launch Ucits-compliant versions of their main funds, HFMWeek can exclusively reveal, joining a wave of recent activity in the Ucits space, confounding fears of a tail-off following May’s performance dip.

As well as the two new funds from Paulson and Biggs, expected to go live in the next few months via Deutsche Bank’s increasingly popular Platinum Ucits platform, HFMWeek has also learned that US investment bank Morgan Stanley has opened up its own Ucits offering to external managers.

Despite recent troubles for the financial markets, which has seen fund performance plunge across the board, Ucits-compliant hedge fund inflows have continued at pace. Assets managed within the Newcits universe have increased by 50% in the last six months alone, Ken Heinz, president of Chicago-based data provider Hedge Fund Research (HFR), told HFMWeek.

According to industry sources, the Paulson & Co Ucits product, based on its flagship fund and expected to be called the DB Paulson Fund, is currently in the process of being pre-marketed and receiving regulatory approval. It is expected to join the Deutsche platform – supporting funds from London-based titans Tosca Fund and, most recently, Winton Capital Management – in the next few weeks. The new offering from Traxis Partners, the hedge fund firm run by Biggs, is scheduled for launch in November.

Deutsche Bank, which is rumoured to be talking to a number of high-profile US managers, is hoping to pick up traction from US-based interest, where clients are apparently keen to distribute European products through a European bank. Deutsche Bank declined to comment.

At Morgan Stanley, the bank’s Ucits offering began incorporating outside managers earlier this year, managing director Heidi Zatlukal confirmed. While there are several Ucits solutions available to Morgan Stanley clients, she said, the main Ucits-compliant hedge fund vehicle falls under the bank’s FundLogic brand.

“We’ve had demands from clients that have led us to opening it up,” she said. “The managers that are now coming to the table are ones that are not necessarily based in London. US managers that are interested in offering their products via Ucits are much more likely to join a platform because they’re much less familiar with the concept of the product. I think that’s why we’re seeing an interest in platform solutions.” Morgan Stanley has seen “dozens” of new funds join its FundLogic solution this year, Zatlukal added.

HFR president Ken Heinz estimates that assets managed by Ucits-compliant hedge funds – or Newcits as they have been dubbed – now stand at around $80bn, up from £35bn ($53.4bn) in February, a six-month increase of 49.8%. It was “very likely” that AuM would exceed $100bn by the end of the year, he added.

The new estimation comes as HFR puts the finishing touches to its latest study of the Newcits space, the results of which are due to be released in August. Along with the new AuM figure, the number of Newcits funds has also been readjusted. Heinz said that funds now number between 400 and 500, more than double HFR’s last census of 200 in February.

Newcits performance in May and June was down 2.7% and 0.38% respectively, according to HFR data. While concerns had been raised that the market crash – considered the wrapper’s first real test since last year’s rise
to prominence – would see the recent Newcits boom grind to a halt, the sustainment of recent activity has suggested otherwise.

“We’re getting more calls increasingly as the year has gone on and it hasn’t stopped,” said Christopher Day, a director of Merchant Capital, who launched their Newcits platform in January. “If anything, it’s still getting bigger.”

Earlier this month, HFMWeek reported that French banking giant Natixis had created a Newcits platform from the dormant structure of its former managed accounts offering.