When it comes to international investing, Bluford H. Putnam, president of CDC Investment Management Corp., sure knows what he doesn't like.
"I hate EAFE," asserted the New York hedge fund manager. The Morgan Stanley Capital International Europe Australasia Far East index, features a "big exposure to Japan and a non-trivial exposure to the U.K."
This international index is weighted to countries with big stock markets, but underweighted to those with well-developed bond markets, he complained.
So, CDC Investment, a unit of France's Caisse des Depots et Consignations, is about to roll out an alternative -- an equity offering that uses the S&P 500 Stock Index as its benchmark, but invests both in the U.S. and abroad. Typically, it will have two-thirds of its exposure in long U.S. stock positions obtained through the futures market, with the remainder in long and short non-U.S. stock positions, said Mr. Putnam.
Using this modified hedge fund, users should expect to outperform the S&P 500, he said. He believes this strategy will be particularly suitable for a U.S. pension fund whose company is heavy focused on U.S. operations -- meaning its pension liabilities are largely denominated in dollars.
The as yet-unnamed strategy also has another feature: competitive fee pricing. Costs will include a lower-than-average fee for U.S. equity management and a performance fee; thus, good performance would result in a fee that's equal to or slightly more than what U.S. managers typically get; but weak performance would result in a lower-than-average fee for U.S. equity management.
