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New Hedge Fund From American Express Bank

by Carla Johnson, Investors Offshore, London

07 December 2001

American Express Bank (AEB) announced yesterday that it had launched its third fund of hedge funds, the Global Market Neutral Conservative Fund of Funds Portfolio.

The new fund aims for conservative returns with an objective of adding 2 to 6% per annum over the US dollar 3-month treasury bill rate. The product is targeted toward risk-averse investors looking for alternative investments to deposits and short-term bonds. As a result, the fund's portfolio has been designed with a particular attention to risk.

"This fund is particularly well suited for our conservative clients who are looking to enhance the yields they receive on their deposits or other cash investments, without picking up significant volatility," says Robert Friedman, Head of the Global Investment Services Group at AEB. "We are positioning this fund as a 'cash enhancement product.' "

The fund's allocation is split among five investment styles: convertible arbitrage, volatility arbitrage, merger arbitrage, equity market neutral and fixed income arbitrage. The maximum allocation to individual managers and style is limited to 10 percent and 25 percent respectively. The fund started to invest on December 1 and includes 17 managers. "Over time, the number of managers will be increased to 20 to 25. Our practice is not to over-diversify our funds of funds but spend considerable time and resources on the selection of our managers to limit risks," says Sam Perruchoud who is responsible for Alternative Investment Fund Management at AEB.

The Global Conservative Market Neutral Fund of Funds Portfolio carries a 1 percent management fee and a 5 percent incentive fee. The share class structure is designed for both internal and external distribution via third parties. The minimum investment is set at US$100,000.

In addition to this new product, AEB Asset Management manages over $3 billion, including $220 million in two other funds of funds, the Global Long Short Fund of Funds Portfolio and the Global Market Neutral Moderate Fund of Funds Portfolio. All three funds have share classes that have been approved for listing on the Irish Stock Exchange. The product offering will be further expanded early next year with the launch of a Guaranteed Note linked to the Global Market Neutral Moderate Fund of Funds Portfolio.

American Express has over $230 billion in assets under management, including $2.3 billion in single manager equity and fixed income Hedge Funds.

AEB, a wholly owned subsidiary of American Express Company, was founded in 1919 and has 75 locations in 41 countries. In addition to private banking, it also offers personal financial services, services for financial institutions and trading services.

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