LONDON Hedge fund firm CQS is planning to launch its first so-called long-short equities fund, a source familiar with the plans said, as it looks to seize on a recovery in investor demand for managers who bet on shares both rising and falling.
London-based CQS, which manages $12 billion in assets, already invests in equities as part of its flagship Directional Opportunities fund, but is best known for playing in credit markets.
The rally in stocks this year has encouraged hedge fund investors to return to funds betting on shares. According to a survey by Credit Suisse published in March, long-short equity funds are the most sought-after hedge fund investments in 2013.
Most equity investment funds are "long-only" and can only bet on share prices rising, but long-short funds have traditionally been one of the biggest strategies in the hedge fund industry.
David Morant, who CQS hired away from rival SAC Capital last year, will manage the new fund with his team, although the timing and size of the launch are yet to be decided, the source said.
The fund - to be called the CQS European Equity Long/Short Fund - will follow a similar strategy to that used by the Directional Opportunities Fund, using a fundamental "bottom up" approach to pick the best stocks, the source added.
Bottom-up investing focuses on the merits of a particular company rather than the industry or economy as whole.
CQS has enjoyed a big rise in its assets over the past few years on the back of strong performance. The Directional Opportunities fund, run by founder and CEO Michael Hintze, is up 7.6 percent year-to-date. Last year it returned 36 percent.
CQS declined to comment.
(Reporting by Tommy Wilkes; Editing by Sinead Cruise and Pravin Char)