Toscafund unveils Ucits version of Cayman fund

Toscafund has launched a Ucits III version of its top performing offshore UK mid-cap long/short fund.

The Tosca Midcap Ucits fund, launched Friday, will sit on Deutsche Bank's DB Platinum Luxembourg platform, as the firm seeks to gain access to a new investor base.

'We were compliant with many of the rules and regulations of Ucits and were getting a number of requests from retail investors for investing in our mid-cap fund. But they couldn’t invest in a Cayman Island fund so we explored Ucits and got together with Deutsche Bank to launch this,' Toscafund partner Matthew Siebert told Citywire.

The existing Tosca Midcap fund has outperformed strongly since its February 2008 launch, including returns of more than 100% in 2009. The firm expects the Newcits version of the fund to closely mirror the Cayman version, and anticipates a tracking error between the two of up to 100 basis points per annum.

The long/short fund is to be managed by company founder Martin Hughes and former Collins Stewart man Paul Compton, who will look for opportunities in the parts of the UK stock market which are less well-covered by analysts.

'We invest in an area of the market which is dramatically underanalysed. We have 1000 investable stocks in our universe, and as you go down into small caps you get very patchy coverage. More than a third of those companies with market caps under £400 million have no analyst coverage at all. So we treat the UK like an emerging market as there are so many unknown, unanalysed companies,' Siebert said.

A key part of the firm's process is a proprietary research product called Tosca Metriks, used for forecasting corporate earnings.

Because of the size of the companies which the Tosca Midcap Ucits fund will invest in, the firm plans to cap the fund at between €300-400 million. 'We cannot allow this fund to grow exponentially, as we would lose our competitive advantage,' said Siebert. 'The last thing we would want to do is gravitate towards the index.'

The fund will generally not have a gross market exposure of more than 150% and it will hold around 30 long and 30 short positions.

It can have net short market exposure, but its directional bias is normally positive, especially now when the firm is positive on the outlook for the market.