Only months after Bear Stearns Asset Management saw two of its top hedge funds collapse, the investment bank has just announced plans to launch a 130/30 mutual fund product, according to Dow Jones Newswires.
The Bear Stearns Multifactor 130/30 U.S. Core Equity Fund requires a minimum investment of $1 million and will be managed by former BFK Asset Management quantitative specialist Michael Rosen.
The fund seeks to outperform the S&P 500 Index by using the strategies of qualitative judgment and quantitative analysis. Although the fund plans to invest primarily in
Some fund consultants are worried that Bear Stearns could have credibility problems after two of its hedge funds collapsed this summer by investing in complex securities tied to subprime loans.
“I would think right now that Bear Stearns would have a credibility issue with any new product they bring to market, particularly any that involves sophisticated investment techniques,” said Burton Greenwald, a Philadelphia-based mutual fund consultant. “I don't think Bear Stearns has a towering reputation as an equity fund manager.”
Marta Norton, a mutual fund analyst at Morningstar Inc. said she’s not surprised that Bear Stearns is using a long-short strategy.
“Yes, there have been some major slip-ups this year, but overall they're still a credible risk manager in a lot of ways,” Norton said. “They have a long tenure and I wouldn't be surprised to see them pull their act together.”
The 130/30 strategy, also known as a short extension, entails investing 130% of assets in long equity positions expected to rise and 30% of assets short in shares expected to fall. The manager typically uses the proceeds from the short sales to purchase the additional 30% long positions.
Short positions for the Bear Stearns 130/30 fund may range between 0% and 40% of assets, according to a prospectus filed Monday with the Securities and Exchange Commission.
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