The phrase “alternative investments” usually refers to managed futures and the myriad of hedge fund strategies. But alternative investments include everything outside the traditional stock and bondportfolio. A group of managers recognizing this has put together a fund of funds that tries to encompass the entire alternative investment universe.
PacStar Development LLC has introduced its PacStar Alternative Investment Fund of Funds (PAIFOF), which is open to accredited investors and will begin trading by the third quarter of this year. The fund will allocate capital to seven distinct alternative investment asset classes: primary hedge fund strategies (20%), multiple hedge fund strategies (20%), private equity/ venture capital (20%), commercial real estate (15%), high yield asset based lending (15%), commodities and managed futures (5%) and special situation banking and insurance (5%).
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The fund of funds was developed in a bottom-up fashion as a group of investment managers came together to create an alternative investment vehicle for their own proprietary capital, according to PAIFOF Managing Partner Ted Staren. The fund tries to put together all of the institutionally recognized alternative investment strategies into one security.
The 13 primary asset managers, who are equity partners in the fund, will run the allocation to their particular strategy. Managers will have the ability to allocate to their own fund or to another manager in that strategy. “Since they have done this in the past, we are giving them a lot of discretion,” Staren says.
PAIFOF initially will offer $10 million worth of interest in the fund though it pegs the overall capacity to be above $1 billion. Its annual target return is 18.4% and it will not use leverage. Staren says they are starting out small in order to prove the concept.
CHARITY WINS
Congratulations to the Hedge Funds Care charity, which raised $500,000 for abused children at its May 1 dinner event in Chicago.
Copyright Futures Magazine Group Jun 2003
