Earlier this week, Dalton Strategic Partnership soft-closed
its European absolute return UCITS fund to new investors at
$500 million following a period of strong inflows
see earlier story).
At the same time, however, the largest fund on the Absolute
UCITS database Standard Life Investments mega
Global Absolute Return Strategies fund, which is 25 times
larger than the DSP fund still continues attract flows
even with assets under management of more than $12.5 billion at
the beginning of June 2011.
GARS is one of the best selling UK funds and flows into it have
been so strong the asset manager created a Luxembourg-domiciled
SICAV for continental European investors (
see earlier story) and hired a US-based marketer at the end
of last year (
see story from InvestHedge).
Which begs the question: does size matter? Clearly, for some
strategies, especially those using strategies that are not
easily scalable, size is important to retain stellar
Both funds highlight that successful funds attract more assets.
The reason for DSPs move to soft close its UCITS fund was
to maintain its performance as Leonard Charlton and his team
generates substantial returns from short side stock selections.
GARS is a multi-asset fund so by definition can invest in most
regulated asset classes and strategies available to them
therefore it would have more capacity.
It could be argued that SLI and DSP are very different asset
managers so have very different objectives the former
being a spin off from an insurance company and the latter a
boutique asset manager. But the presence of both firms in this
space highlights the convergence between hedge funds and the
long-only world in the UCITS arena.
Excellent funds run at their optimum not maximum size and many
investment or portfolio managers I have spoken to over the
years have said that the fund becomes a different beast once it
breaks through a particular AUM barrier. Many investors prefer
smaller and nimble funds because of the size issue.
I remember one fund manager telling me that everything changed
once one of his funds hit the $10 billion mark. Time will tell
if GARS has what it takes to be a mega fund and have continued
SLI has launched a bond version of GARS and both funds
are managed by teams led by Euan Munro. It seems logical to
conclude that the reason for the launch of the bond fund is
because the mega fund is simply too big to gain from individual
For a free trial of Absolute UCITS please click