OppenheimerFunds will test the appetite of retail investors for hedge funds. The firms two new products, the Oppenheimer Tremont Market Neutral Fund and the Oppenheimer Tremont Opportunity Fund, are multi-manager hedge funds geared toward retail investors.
The two funds in the Oppenheimer Tremont Hedge Fund Series are designed and managed by Tremont Partners, the subsidiary Oppenheimer acquired last summer, and will be distributed through Oppenheimers distribution unit.
"Retail investors have lacked access to hedge funds for too long," said John Murphy, CEO of Oppenheimer, in a statement.
The $50,000 minimum investment for the funds is much lower than most hedge funds, said Donna Winn, CEO of OFI Private Investments, a unit of Oppenheimer. However, individuals must be qualified investors with a net worth or joint net worth with their spouse of at least $1.5 million.
The funds will use a multi-manager approach whereby Tremont will allocate fund assets among a number of different fund managers and strategies in order to diversify risk and decrease volatility in the fund. While some firms have portfolio managers run both hedge funds and traditional mutual funds, Oppenheimer is keeping the management separate to allow Oppenheimer managers to focus on its mutual funds, according to Murphy.
"We need to debunk the perception that all hedge funds are aggressive and speculative, when, in fact, hedge funds can actually act as a risk management tool," said Robert Schulman, co-CEO of Tremont. "They are a great way to diversify portfolios across asset classes, and historically, have provided returns that are less volatile through a variety of market conditions than traditional stock and bond market indices."
The Market Neutral and Opportunity funds have a one-time sales charge of 2.5%, and annual management and administrative fees of 2.15% and 2.35%, respectively. They also have a incentive allocation fee of 5% for the Market Neutral Fund and 10% for the Opportunity Fund that is paid to the investment advisor out of net profits above a pre-determined "hurdle rate." The hurdle rate for the Market Neutral fund is the two-year Treasury rate and 8% for the Opportunity fund.