UPDATE: Neptune to launch long/short fund for Geffen next month

Neptune is launching a global long/short fund for founder Robin Geffen and Ted Alexander on 1 November.

The Neptune Global Long Short Sector fund, a directional fund, will invest in ten different sectors across the globe, holding large liquid stocks, with short positions established through swaps written against the same baskets.

The sector baskets, each holding between 20 and 50 positions, will be constructed for Neptune by prime broker Morgan Stanley. The managers will be able to gear the fund should they take a positive view on market direction.

Geffen will feed in ideas on global sector overweights and underweights to Alexander, who will be responsible for implementing the long and short positions. Around 15% of each sector will be exposed to emerging markets to reflect the global GDP balance.

Alexander has been assistant manager on Geffen's £849m Neptune Balanced fund since 2009. He has also been lead manager on the £27m Neptune UK Equity fund since October 2010, and heads Neptune's six-strong UK team alongside Alex Breese.

Neptune expects the long/short fund's volatility to be broadly similar to that seen on its Global Equity fund, but sees the former as providing potential for greater capital growth as well as an element of capital protection when needed.

Alexander said: "As far as we are aware, the Neptune Global Long/Short Sector fund is the first fund to use basket swaps at a global sector level. This is not a hedge fund, a 130/30 Fund, an absolute return fund or a vehicle following some kind of highly volatile leveraged strategy.

"This product is a transparent UCITS fund that purely uses the wider powers to go long or short on sectors. To short/long sectors is a natural extension to what we already do - we already set targets for sector exposure as part of our core research. Now, however, we have the ability to take these target positions and use them to set long/short targets, rather than overweight/underweight.

"We are not shorting individual stocks, and therefore the shorting risk is much lower than for long/short stock funds. By shorting sectors, which are diversified to eliminate idiosyncratic or stock-specific risks, the fund should have a lower volatility and potential value at risk."

Neptune said under "normal conditions" the fund's exposure would be 150% gross/120% net.

The fee structure on the new offering is expected to be broadly in line with that seen on Global Equity, though the long/short fund will charge a performance fee with a high water mark.

The existing £1.3bn global fund, managed by Geffen, has lagged peers over the last year, losing 11% against the IMA Global sector average loss of 5.5%.

Over three years it has also underperformed, returning 24.3% against a sector average return of 25.8%, according to Morningstar, though it remains top quartile over five years.

Updated at 10.25 on 19 October