Investcorp prices securitisation of a fund of hedge funds

Investcorp, announced on Monday the pricing of its Diversified Strategies CFO securitisation, one of the first market value collateralised fund obligations (CFO) backed by a fund of hedge funds.

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By  Massoud Derhally Published  May 29, 2002

Investcorp, the global investment group, announced yesterday the pricing of its Diversified Strategies CFO securitisation, one of the first market value collateralised fund obligation (CFO) backed by a fund of hedge funds, and one of the first public issues of this type anywhere.

Credit Suisse First Boston was the sole lead manager and book runner on the transaction, which is expected to close shortly.

Managed by Investcorp, the five-tranche issue totals US $250 million. The Diversified Strategies CFO will invest in a broadly diversified fund of hedge funds, tracking the performance of Investcorp’s established Diversified Strategies fund. Investments will be heavily tilted towards relative value strategies, but will also include some more directional strategies. Funds of hedge funds have relatively low volatility and are uncorrelated to other asset classes such as debt and equities.

Investcorp Management Committee Member and General Manager of the Firm’s Bahrain office, Salman Abbasi, said, “The issue has been successfully distributed to a broad range of investors globally, including solid demand from our Gulf investor base. We are delighted that together with CSFB we have brought to market an innovative new product.“ The ratings given to this transaction reflect not only the high quality of the collateral, but also recognition of Investcorp’s experience as one of the world’s leading fund of hedge fund managers.

“For our investors in the Gulf, the equity tranche of this transaction represents strong investment diversification offering attractive rates of return. The product has low underlying volatility and lends itself to the use of leverage, and provides equity investors with competitive five year term financing on a non-recourse basis. For Investcorp this transaction is strategically important, creating relationships with a wider group of international institutional investors as well as broadening our Gulf investor base,” added Abbasi.

Investcorp currently has assets under management of $2.8 billion, making it one of the world’s largest funds of hedge funds managers. In total, the program has six funds with 11 strategies and is invested with more than 60 carefully selected hedge fund managers.

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