The first note closes on May 1, postponed by a month due to strong demand out of Japan and other locations, says NewHaven Chairman David Humphreys. A major reason for Lake Shore to seek principal protection on its existing fund was to make it attractive to Asia-based investors, who now make up a negligible portion of Lake ShoreÆs investor base. Lake Shore currently manages around $1 billion.
The Lake Shore Alternative Asset Fund I has returned 23.75% per annum since January 2003, versus around 16% for the S&P 500 Index. The firm has a 12-year investment history and average compound annual performance of over 20%.
Now, Nomura is underwriting a participation note that covers 80% of the fundÆs NAV. There is no fee to the investor although there is a 1.5% annual redemption charge on the note. Lake Shore charges no entry or exit fees for its funds; it charges a 25% performance fee beyond a highwater mark. Lake Shore offers weekly liquidity.
NomuraÆs fees are generated solely from trading performance and investors can opt to invest without the guarantee. The guarantee is perpetual and the fund is open-ended. Minimum investments are $100,000.
Humphreys adds that if an investor wants other types of protection than the Nomura note, it can be arranged, although it may involve an additional cost.
Lake ShoreÆs first fund covers futures listed on US exchanges. It also has a second fund that deals with futures from European bourses, plus some futures in oil and gold. Now the firm is preparing to launch a third fund covering listed futures in Japan, Korea, Hong Kong and Australia. NewHaven will also market this to clients in the Asia-Pacific region.
If the principal-protection note feature is a success on the US version, Lake Shore may expand this to its other funds, Humphreys says.
NewHaven receives no commission from Lake Shore, but is paid based on the fundÆs performance, so it has very low distribution costs and no incentives to churn customers, he adds.
NewHaven originated two years ago as an idea between Humphreys, who had run HSBCÆs regional pensions efforts, and Alistair Macleod and Daryl Evans, both formerly of the VIG Group. Its initial business was (and remains) marketing United States-based pools of senior life insurance settlements. Last year it teamed with two organisations in the United Kingdom involved in litigation finance to securitise these loans.
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