Can the West Bank spring a surprise?
1 September, 2008Be careful what you wish for: goodbye Musharraf
1 September, 2008NEW PRODUCT
DWS Strategic Value Fund (Enhanced Liquidity)
What is it?
It’s a fund-of-hedge funds – or rather, it’s a liquidity-enhanced product giving exposure to one.
What does that mean?
Hedge funds broadly refer to absolute return strategies, which are not required to follow standard equity benchmarks and in theory ought to be able to provide a good return in any environment. An example of this approach is long/short (that is, being able to take positions that benefit from falls in share price values, not just gains). Since hedge funds are sometimes considered a bit risky, or heavily concentrated, it is common to use so-called fund-of-funds, which combine exposure to several different hedge fund strategies into one. Deutsche launched one of these in Australia back in 1999; the new fund is made up of certificates that effectively make the same investments as that fund, but the big difference is that you should be able to get in and out of it on a daily basis, not once a month as was the case with the original fund.
How’s the original fund done?
Since inception in 1999, an annual rate of return of 7.96%. A year ago that wouldn’t have caught much attention, but these days it looks pretty good.
And how wide does it spread the risk?
The original fund (which the new one mirrors) invests in 15 to 35 hedge fund strategies.
What are the fees?
1.1% investment management fee, with a performance fee too – a whopping 15% of the increase in net asset value, after fees and costs.
What are the risks?
Hedge funds have not always lived up to their promise of rewarding people through the bad times. A number of hedge funds have failed over the years, though the diversification of the DWS approach helps with that. On the plus side, hedge funds are largely uncorrelated with equities, which helps diversify your portfolio.
