Smart Investor: Up To Speed column – February 2009

New Product

Super Alpha Fund 1

What is it?
It’s a multi-strategy fund, but the biggest part of it is in managed futures.

What does that mean?

Multi-strategy means it invests in a few different ways at once. A quarter of your money goes into Australian cash, and the remaining 75% goes into four trading programs, mainly managed futures. This means it trades in financial, currency and commodity futures markets around the world – that is, taking a view on the price of those things at some point in the future. Futures are an easy way of accessing difficult markets like currencies and commodities, and can provide very large exposure, but also bring the potential for increased losses.

Who is behind it?

A group called Superfund, a global specialist in this area, based in Austria (naturally since a super fund has a different meaning in Australia, they’ve changed their name here). All told it provides products to over 50,000 retail and institutional investors; it boasts that its flagship Q-AG Fund (now closed) has returned 17.9% a year net of fees since inception in 1996.

Why this approach and why now?

This fund seeks to get some of the money that increasingly finds its way into alternative assets, the idea being that it helps to diversify risk. The product itself diversifies you across a range of countries, commodities, currencies, share indices and so forth, and can take both long and short positions (ie in theory it can benefit from a falling market). Two of its strategies are linked to gold, which normally behaves as a safe haven when markets are uncertain.

Isn’t it risky?

Superfund has always used a proprietary trading system with pre-set stop loss mechanisms – that is, once you’ve lost a bit of money on a trade, you close it out before you lose any more. But there’s no question products like this can be very volatile from month to month and a long term view is essential. 

What are the fees?

Much bigger than in more mainstream investments: for retail investors (minimum investment A$10,000), it’s a 2.43% management fee and a 27% performance fee.

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