| Hedge funds - back on the agenda |
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In a property mad market, hedge funds have failed to take off to date in Ireland.
However, Merrion Stockbrokers is looking to buck the trend as it launches a new hedge fund. |
Three years ago it looked like hedge fund management would take off in Ireland, as a host of new names established operations and the top stockbroking firms invested in their own funds. However, the expected growth never really materialised, but this may be set to change as Merrion Stockbrokers launches a new hedge fund, managed by Adrian O'Carroll, one of the foremost stockbrokers in Ireland.
O'Carroll, who was a founder and is presently head of equities at Merrion, and three times winner of 'Best Equity Sales Person' in FINANCE's Annual Stockbroking Survey, is expected to launch his fund in September/October. The initial investment focus of the fund will be the Irish equity market, but speaking to FINANCE, O'Carroll said that while the fund will start with Ireland, it will then look to the UK and European markets. 'The objective is to achieve above average returns, and it will be a very concentrated long-short fund, focusing on 10-15 stocks', he told FINANCE, adding that it will be leveraged up to around three times.
Both Merrion, and its parent company Icelandic bank Landsbanki, will invest in the fund and it will also be open to a limited number of outside investors. Once the €50 million figure is reached it will close, but O'Carroll says it might open again to initial investors. Minimum investment will be €250,000, and investors can expect to pay 1.5 per cent in annual fees, and a performance fee of 20 per cent, which is pretty standard in the hedge fund world.
O'Carroll's fund forms part of an overall strategy by the firm to move more into fund management. Earlier this year the firm established a specialist division, Merrion Fund Management Ltd., and the firm currently runs three funds, employing 4/5 people. However, O'Carroll says that this is set to grow as the firm rolls out a suite of products, including his hedge fund, aimed at the high net worth/private client market. Enqrique Curran will replace O'Carroll as Merrion's new head of equities.
Hedge funds can be a lucrative business, as the latest issue of industry publication Alpha magazine reveals - combined, the top 25 managers in the world earned over $14 billion in 2006. The fees for Merrion's new fund will be an annual fee of 1.5 per cent, and a performance fee of 20 per cent, which is a hedge fund industry norm. What this means is that the managers will take a 20 per cent cut of all gains on the fund before doling them out to investors.
But, while assets under management in the global hedge fund industry have soared over the past ten years, in Ireland firms have struggled to find success in a property mad market. In FINANCE of February 2004, a flurry of new hedge fund managers were announced, but three years on, many of these firms, such as Burdon Capital and Broadstone Fund Management, have closed.
Merrion itself previously launched its first hedge fund, the Merrion Kinetic Fund, in 2004. However, the fund closed some months later as it failed to 'find traction' says O'Carroll. In October 2003, NCB Stockbrokers also launched its own hedge fund with €25 million. However, by the end of 2004 the fund, the NCB European Select Fund had closed.
Goodbody Stockbrokers also got in on the game, but its Goodbody Alternative Long/Short Equity Fund is currently the second worst performer amongst European long/short equity funds according to Hedge Fund Intelligence's league table.
Davy Stockbrokers has had more success however. It was one of the first to see the potential, acquiring hedge fund boutique, Focus Investment Managers, in August 2003. Today, this firm is going from strength to strength and currently runs six funds, with almost €1 billion in assets under management. |
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| Article appeared in the May 2007 issue.
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