KeyCorp is about to join a growing list of banking companies introducing hedge funds of funds.

The Cleveland banking company's Key Asset Management unit plans to launch an offshore version of the product next month to be sold to foundations and endowment clients of KeyCorp's nonprofit asset services group.

Soon thereafter - the timing depends on initial demand - KeyCorp plans to start an onshore version that would be sold to individual investors, said Cindy G. Koury, a senior managing director for nonprofit asset services at Key Asset Management.

Hedge funds use a variety of investment styles - such as taking long or short positions in equities or investing in distressed securities. A fund of funds invests in the portfolios of several different managers.

The Key fund's subadviser is to be Hedge Fund Research Inc., a Chicago company that manages $2 billion of assets in hedge fund of fund products for 15 clients, including some banking companies.

Having such a fund "provides a good diversification" for an investment portfolio, said Joseph G. Nicholas, chairman of Hedge Fund Research.

But many banking companies have been reluctant to launch hedge funds, he said, because of the lack of transparency and research on the portfolios.

Ms. Koury said transparency is one of the company's goals. "We will only utilize managers where we'll be able to see their portfolios and know what they're doing," she said.

Most of the larger U.S. banking companies now offer hedge funds of funds, said Virginia Reynolds Parker, president of Parker Global Strategies in Stamford, Conn., which designs and monitors hedged products.

Chase Manhattan Corp., Citigroup Inc., and National City Corp. of Cleveland are among the companies that have introduced or created access to hedge funds of funds.

"A fund of funds fits well at banks," Ms. Parker said. "It offers inherent diversity for clients and can provide exposure to many different hedge fund strategies without the client having to make too large an investment."

Though most hedge funds require an investment of at least $1 million, she said, funds of funds generally have minimum investments ranging from $250,000 to $1 million. KeyCorp's fund is to require a minimum investment of $500,000.

Initially the fund is to be sold only to KeyCorp customers, Ms. Koury said, but if interest justifies it, Key would consider selling it outside the company.

Key Asset Management manages $6 billion of assets for nonprofit clients and $77 billion overall.

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