Frontier to launch managed futures fund of funds

Alternatives manager Frontier Capital Management is launching a managed futures fund of funds next week, at a time European investors rate commodities as the only asset class that has not risen in risk since the crisis.

The model-driven FrontEdge Managed Futures fund is the second alternative fund from Frontier, following FrontEdge Global Hedge fund, launched in 2009.

Michael Azlen, founder of the $600m manager, said Frontier’s products have always allocated to managed futures managers due to their high liquidity and low correlation to equities and to other hedge funds.

In 2008, model-driven funds made 14%, according to data provider BarclayHedge, while other hedge funds fell 19% and shares slumped by about 43%.

They have found the going somewhat tougher this year, making 4.8% by 31 October.

A recent survey of about 300 pan-European investors commissioned by Goldman Sachs Asset Management found commodities – part of managed futures’ universe – was the only assets class of six regarded as no riskier than before the crisis.

Azlen said: “The inclusion of managed futures in either traditional equity/bond or more diversified portfolios has been shown to improve risk-adjusted returns, and is one of the most liquid absolute return strategies.”

Frontier’s offering will invest in funds, managed accounts, and programs that replicate strategies using synthetic instruments. It will launch with $40m, but Frontier expects further commitments to swell it to $60m by year’s end.

Marc-Phillipe Davies, co-manager of the fund with Alex Gaitan, said the management team had an edge, because it had traded for about five years the actual instruments managed funds use.

His fund will allocate to about 20 managers, mindful of their internal correlation and their own merits.

Gaitan, who also runs FrontEdge Global Hedge, was previously a senior hedge fund analyst for Redi & Partners, and a senior trader at WBS Holding in Romania. Davies joined Frontier in 2004 from accountancy at Goldcrest Films International.

The minimum investment in Frontier’s latest fund is $100,000, via sterling and US dollar share classes. It will be made available on the Transact and Nucleus platforms.

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David Walker

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