The fund aims to achieve capital appreciation by taking long and short positions in UK equities, primarily outside the FTSE 100 Index, maintaining low net exposure to underlying equity markets.
Managed by fund manager Tim Service and deputy fund manager Luke Kerr, it also aims to deliver absolute returns in all market conditions.
Mirror Cayman
The strategy will mirror OMGI’s Cayman-domiciled vehicle that has a long track record dating back to 2003. Since its inception, the Cayman vehicle has delivered an annualised return of 7.5% after fees, and 8.7% over the past three years, with a largely market neutral approach.
The fund will be well diversified, holding a range of between 80 and 110 long and short positions. It will typically have a net exposure of between -20% and +20% of NAV, making use of individual single-stock short positions and index baskets to control the net exposure to equity markets.
Service and Kerr, supported by OMGI’s UK small and mid-cap equities team, will use a combination of top-down macroeconomic analysis, and bottom-up stock-picking to structure the fund.
The team believe the small and midcap universe of companies is less well researched than large companies, providing more opportunities to generate returns.
Increased volatility
“Market volatility has increased in recent months, highlighting the potential value of alternative investments within a portfolio,” said Service. “This fund offers access to [the UK team’s] expertise, with low net exposure to underlying equity markets, and the ability to deliver a return from falling as well as rising individual share prices.
“The results can be seen in the low volatility and steady returns of this strategy over 13 years. The maximum drawdown of the Cayman strategy since 2003 has been just 4.1%, and the sterling asset class has never had a down year. The new Ucits version will be run on the same basis that I have used since taking over the fund in 2014.”
Warren Tonkinson, OMGI managing director, added: “With a proven track record in managing a low net equity long short investment process for 13 years, a number of clients have shown interest in wanting to access the investment approach in a Ucits wrapper.”
