Geffen and Alexander reveal sector positions on long/short fund

Ted Alexander and Robin Geffen have revealed potential positions for their global long/short fund, to be launched on 1 November.

The fund, which marks Neptune's first foray into the long/short space, will be overweight technology, materials and industrials sectors while shorting financials and healthcare.

The group believes the Global Long/Short Sector fund will be the first of its kind in that views on sectors will be expressed by baskets of between 20 and 50 swaps constructed for Neptune by prime broker Morgan Stanley.

Geffen will feed in ideas on global sector overweights and underweights to Alexander, who will be responsible for implementing positions.

On the long side, the fund will back IT: "There has been a lack of investment in hardware for the last three to five years so there is a lot of pent up investment and also the demand from emerging markets," Alexander said.

As a house, Neptune has been negative towards the financials sector for some time, and remains so.

"We have not liked the banks since 2008 and still think there is more pain to come. Sovereigns are trying to shift their pain back to the banks as it will be less painful and more politically acceptable for corporates to take the hit, as opposed to governments."

The fund will also be short on healthcare stocks, which Alexander said are looking expensive.

However, he added, the managers are not aiming to take aggressively short positions on the market: "We are a long-only house so the majority of the sector positions are going to be long, we are not going to be hyper-aggressive with shorts."

The fund will sit in the Global sector alongside Geffen's £1.3bn Global Equity product but Alexander said, although there are similarities between the two funds, they will have different risk profiles and the long/short vehicle should appeal to the more sophisticated investor.

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.

In terms of outlook, Alexander said he can see some upside in the markets but is nervous about risk aversion.

"There is a lack of logic and a bit of panic in the market. We had these falls in August but the same risks have been there since 2008 - there was no new sudden jolt in risk, it is just the behaviour of the market.

"The market does look good value and stocks are cheap but risk aversion is high. If risk falls and we see more normal valuations there could be some upside in the market."

However, he added, there have been some positive catalysts resulting from the spikes in risk, such as the recent second round of quantitative easing from the Bank of England and the likelihood of QE3 in the US.