Chase Manhattan Corp. intends to begin marketing hedge fund investments to its wealthiest clients, senior officials of its private bank disclosed in a press briefing last week.
Chase's planned entry into the hedge fund market is notable, given the extraordinary losses experienced by some hedge funds this year.
At the press briefing, bank officials were mum on details but acknowledged the difficulties of offering a hedge fund. They added, however; that New York-based Chase's toniest clients are clamoring for hedge funds, which by law are private partnerships limited to 99 investors at most.
"Notwithstanding the choppiness of markets and the fact that some people have been hurt by this, there is a lot of appetite for this product," said Mark R. Richardson, chief investment officer of Chase's asset management unit.
Hedge funds pursue a variety of often highly exotic investment strategies. They can have volatile performance, especially if they aggressively use leveraging techniques that can multiply returns or losses.
Hedge funds often require minimum commitments of $1 million to $5 million. According to market experts, hedge fund managers can collect fat fees -- often a portion of the fund's earnings.
James W. Zeigon, executive vice president of Chase's private bank, said the company plans to offer its clients hedge funds run by a range of managers, possibly including one run by the banking company.
Chase may market a "fund of funds" approach to hedge funds, Mr. Zeigon said. A fund of funds normally allows investors to put in smaller initial investments than would be required in a hedge fund, often just thousands of dollars. A fund of funds normally allocates assets among a range of hedge funds to reduce volatility.
Mr. Richardson said Chase would generally expect clients to invest less than 5% of their portfolios in hedge funds because of the risk.
Separately, at the briefing, Chase senior vice president F. Daniel Prickett gave an overview of a global investing forum the private bank held late last month for its wealthiest clients.
The gathering, in New York's Pierre Hotel, attracted 340 Chase customers, with an average of $100 million to invest, he said. Speakers included former Secretary of State James Baker, electronic publisher Michael Bloomberg, and Pedro J. Noyola, Mexico's under secretary for international trade and investment. Tony Bennett was the featured entertainer at an evening soiree.
Mr. Prickett said the mood among attendees was "very optimistic." Despite the difficult markets this year, he said, attendees were enthusiastic about international investing, especially in emerging markets.
Mr. Prickett declined to say how much Chase spent to entertain so many super-rich customers. "Obviously, you want to do it first-class," he said. "But we watch our expenses pretty well."