The no-hedge hedge

5 October 2005 By Alex Fak

Portfolio concentration has its merits. It forces the manager to devote more attention to stockpicking and avoid mindless diversification. But the big drawback with a singlestock fund is that the manager might become too riskaverse in picking his company.

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In a telephone interview with breakingviews, a hedge fund manager, who asked to remain anonymous, said he and a partner have raised a fund of $300m$500m which has been invested in the shares of a single US company.

He said the identity of the company has been disclosed to investors, but did not say at what point in the deal. The stock is underrated, he said, and the fund would wait for a "catalyst" which could take as much as "a few years" to emerge.

The few investors had to put up "a very high minimum" investment to join the fund, said the manager.

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