AIM Management Group of Houston has filed to register a new closed-end mutual fund that will cater to wealthy investors seeking alternative types of investments.
This is only the second closed-end fund AIM will be managing, and the first fund that will target the high-net-worth audience. Its only other closed-end fund, the AIM Floating Rate Fund, formerly the G.T. Global Floating Rate Fund, was inherited by AIM through its parent company's 1998 acquisition of the adviser to the G.T. Global Funds.
The creation of the new fund also marks only the second time AIM has teamed up to co-manage a fund with INVESCO Funds Group of Denver. Both AIM and INVESCO are subsidiaries of AMVESCAP of London.
AIM has hired the private equity/venture capital unit of INVESCO Funds to be this fund's sub-adviser. This is the first time AIM has chosen INVESCO to sub-advise any of its funds. But in June of last year, INVESCO chose AIM to be the sub-adviser to the INVESCO Tax-Free Bond Fund.
The new closed-end AIM Millennium Alternative Strategies Fund will invest in a mix of both publicly-traded equities and private securities of companies which expect to conduct an initial public offering, according to the Feb. 9 filing. The fund will also invest in privately-held companies or in firms that invest in privately-held companies.
AIM will manage the portion of the fund that invests in public stocks. AIM expects to use investment techniques such as using options and futures, short selling, hedging securities and leverage, according to the filing. AIM will be seeking companies in "special situations" such as those in which a company makes a technological discovery, has undergone a change in its corporate structure or has had a favorable litigation settlement, the filing said.
INVESCO Private Capital of New York, the venture capital division of INVESCO Funds which has so far invested $3 billion in private companies and private equity funds, will sub-advise the fund's investments in private securities or venture capital companies. Up to 35 percent of the fund may be invested in private securities and up to 50 percent of that may be invested in private investment funds, said the filing.
INVESCO Private Capital originated in 1982 as part of Citicorp Investment Management. In 1988, it changed its name to Chancellor Capital Management and in 1996 it was renamed LGT as a result of a merger between Chancellor and Lichtenstein Global Trust of Vaduz, Lichtenstein. AMVESCAP, INVESCO's parent, acquired Lichtenstein Global Trust, which was also the adviser to the G.T. Global Funds, in 1998.
In order to invest in the new closed-end fund, investors must have $1.5 million of net worth or $750,000 being managed by AIM, according to the filing.
"The high-net-worth market has the appetite for products that have the attractiveness of hedge-like capabilities and that can provide the convenience that mutual funds can," said Ivy McLemore, a spokesperson at AIM.
AIM created the AIM private asset management unit, a separate high-net-worth investment division, in September. So far, the unit has taken in $7 million, said a company spokesperson. Instead of offering funds, AIM's private asset management unit offers separate accounts that are tailored to the needs of wealthy investors.
The newly-registered AIM Millennium Alternative Strategies Fund will charge a 1.75 percent management fee, an undisclosed portion of which will be paid to INVESCO as the sub-adviser. The management fee paid by the fund to AIM includes a performance-based incentive fee that will be paid quarterly. The incentive fee, which could increase the fees paid to AIM by as much as 15 percent, is accrued on net unrealized gains on the fund's shares.
AIM has three retail mutual funds that invest in companies in special situations and that have performance fees, but the funds have been closed to new investors for about six months, said McLemore. The closed-end AIM Alternative Strategies Fund will not trade on an exchange in a secondary market as many other closed-end funds do.