Orbitex Financial Services Group has formed an alternative strategies division to market hedge fund-based products in the U.S. and abroad. Orbitex Alternative Strategies (OAS) has been targeting high-net-worth and small institutional clients in foreign markets for the past eight months and has just now introduced its alternative strategies in the U.S.
Rather than investing directly in hedge funds, OAS creates separate investment vehicles that invest in hedge funds, as a way of offering liquidity to investors. These products also offer guarantee of principal. "In general, [hedge] funds have been subject to risk of principal loss, very little regulation and little or no transparency to the buyer," said David Henritze Jr., managing director of OAS.
"OAS is introducing products in response to a demand for investments that capture the absolute return of hedge funds, protect the principal at maturity and provide weekly liquidity," Henritze added.
"I think that while some of my competitors think this product is cyclical, after Sept. 11, people are looking for a guaranteed principal product," added Orbitex CEO Richard Stierwalt, who called the guarantee a "differentiating factor" for the Orbitex product line.
The firm's first U.S. product is a bond that incorporates a principal guarantee. The offering period will close on June 28, Stierwalt said.
Stierwalt expects to have attracted approximately $250 million in assets from investors in Europe and the Middle East by the end of June. Orbitex is marketing the new products through four institutional salespeople, its own broker/dealer and third-party institutional sales firms. Orbitex has a total of $12 billion in assets under management and administration.