Macquarie Bank invests $40 million in Newton Specialist Funds
15 July 2004
Macquarie Bank has invested $40 million in four new equities trading hedge and specialist strategies, and is now giving wholesale investors the opportunity to invest alongside the bank.
Managed by a new Macquarie business, Macquarie Newton Specialist Funds Management Limited, using professionals who formerly worked on Macquarie Equity Markets Group’s proprietary trading desk, the new funds have been launched in response to unprecedented demand from investors for absolute returns.
Macquarie has considerable skill in this area, having traded absolute return strategies for a number of years.
The Macquarie Newton series of funds will offer the capacity for capital growth/income for a minimum individual subscription of $50,000.
Division Director, Cathy Kovacs, says the funds have been constructed to provide investors with an efficient way to access the kind of returns Macquarie has derived during its many years trading equity hedge fund strategies.
“The funds offer investors exposure to situations and price differentials, which they would otherwise find prohibitive to trade directly themselves,” says Ms Kovacs.
“The funds are tailored to suit the risk and return requirements of different categories of investor. They provide diversity across a variety of sophisticated hedge fund strategies in a way that aims to provide attractive risk-adjusted returns in a variety of market conditions.”
Demand for absolute returns has soared in recent years as investors look to hedge funds as a means of diversifying their exposure. The global hedge fund industry posted a record US$60 billion of institutional net inflows in 2003, a fourfold increase on the year before, according to Tremont/Tass, the hedge fund data provider. It estimates that total assets in the hedge fund industry now stand between US$725 billion and US$750 billion.
In Australia, the average return for the local hedge fund industry for the year to March 2004 was 17.3 per cent, according to Australian hedge fund data provider InvestorInfo. The average return for specific strategy hedge funds was 21.9 per cent, significantly above the industry average return.
The Newton series comprises three absolute return funds – Macquarie Newton Special Events, Macquarie Newton Australian Absolute Return, and Macquarie Newton Index Arbitrage – which were launched in October last year and aim to provide capital growth. Macquarie has invested $10 million in each of these strategies.
A fourth fund, Macquarie Newton Buy Write Fund, which is focused on providing an income stream, was launched in March with an initial $10 million investment from Macquarie.
The funds, which are open-ended, will be offered initially to Australian residents, and subsequently to the international marketplace.
Ms Kovacs says Macquarie has a long and consistent track record in trading absolute return strategies within a robust risk-management framework.
“These funds will be offered within a strong operational risk framework with advanced execution, pricing, risk management and compliance monitoring systems,” says Ms Kovacs. “The sophisticated trading and execution systems available to Macquarie Newton enable direct real-time access to a diverse range of markets and allow us to keep trading and transaction costs low.”
Target Returns
| Fund | Gross Return Target |
|---|---|
| Newton Australian Absolute Return Fund | Cash + 8%pa |
| Newton Buy-Write Fund | S&P/ASX200 Accumulation Index + 3%pa |
| Newton Special Events Fund | 12%pa |
| Newton Index Arbitrage Fund | Cash + 3%pa |
Information about Macquarie Newton Funds
Special Events Fund: This fund seeks to profit from opportunities arising from corporate events such as announced mergers and acquisitions, initial public offerings and share buy backs. This fund will suit investors who want moderate risk. It aims to outperform a cash benchmark and should be considered over a five-to-seven year time frame.
Index Arbitrage Fund: This fund provides investors with low risk and moderate return opportunities. The fund aims to exploit price differentials that arise from time to time in the value of shares traded on the Australian Stock Exchange and the theoretical value of the Share Price Index (SPI) Futures contract. The fund also has the ability to trade the same strategy in global markets when opportunities arise. These opportunities are irregular and as such investors should take a long term approach to this investment.
Australia Absolute Return Fund: This fund provides investors with an alternative to a traditional long equity fund. The fund is designed to provide returns that are uncorrelated with the equity market. The fund aims to preserve capital and deliver consistent positive returns that exceed those of the Reserve Bank of Australia Cash Rate Target over rolling three year periods.
Buy Write Fund: This fund is designed to provide investors with high yield and some capital growth. The fund will engage in derivative strategies, such as call writing, designed to achieve superior risk adjusted returns when compared with a direct holding in shares.
For further information please contact:
Cathy Kovacs
Division Director
Equity Markets Group
Tel: (612) 8232 8683
This information has been prepared by Macquarie Newton Specialist Funds Management Limited ABN: 84 086 438 995 (“Newton”) and is intended for the sole use of Wholesale investors only. This information is to be distributed to wholesale investors only. Investments in Newton funds are restricted to wholesale investors. All potential investors should obtain an Information Memorandum from Newton relating to the funds mentioned and consider it before making any decision about whether to invest. Past performance is not a reliable indication of future performance. Investors should consult the Information Memorandum for the full details of the assumptions upon which the forecast return and tax treatment are based. Investors should be aware that these are forecasts and may be affected by the accuracy of assumptions, risks and other uncertainties which may cause the actual returns to differ. Newton is not an authorised deposit taking institution for the purposes of the Banking Act (Cth) and Newton's obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542. Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of Newton. Investments in the funds are not deposits with or other liabilities of Macquarie Bank Limited or of any Macquarie Bank Group company and are subject to investment risk, including possible delays in repayment and loss of income or principal invested. None of Macquarie or any other Group company guarantees the performance of the funds or the repayment of capital from the funds or any particular rate of return.