June 3, 2011 / 3:33 PM / 8 years ago

Bernheim Dreyfus eyes $100 mln for M&A hedge fund

* Continental European institutions, banks favour Ucits

* Daily liquidity, $10 mln from seed investors

By Laurence Fletcher

LONDON, June 3 (Reuters) - Paris-based Bernheim, Dreyfus & Co plans to raise $100 million for an onshore version of its M&A hedge fund to meet demand from continental European investors wanting more transparent hedge fund structures after the crisis. The firm launched the Diva Synergy (Ucits) fund — a mirror of its offshore fund — on Wednesday with $10 million from seed investors, it said in a statement sent to Reuters.

Continental Europe-based institutions and private banks now prefer Ucits funds — which usually give clients more information and quicker access to their money than traditional hedge funds — to offshore funds, said partner Amit Shabi.

“French pension funds don’t even talk to you if you have an offshore fund,” he said in an interview on Friday. “Private banks mostly prefer Ucits ... because they don’t have the time to go and do a long due diligence process.” The EU directive known as UCITS — Undertakings for Collective Investment in Transferable Securities — allows firms to sell funds into any European Union country after approval from a single member state.

Ucits hedge funds have risen in popularity since the credit crisis after many offshore funds limited clients’ access to their cash, although critics point out that Ucits can also restrict redemptions during periods of market stress and that not all strategies are suitable for Ucits.

Data last month showed European investors pulled out more from Ucits than from other regulated funds in March as unrest in North Africa and Japan’s earthquake hit markets. [ID:nLDE74G177] The Diva Synergy (Ucits) fund will give investors daily access to their money, said Shabi, who added that liquidity would not be a problem, even in situations like the 2008 credit crisis. The offshore fund currently has monthly liquidity.

“We are managing very liquid strategies,” he said. “We’ve been managing the offshore fund as if it had daily liquidity.”

The fund holds between 15 and 30 positions playing announced deals and a similar number betting on so-called “pre-event-driven” — situations where the manager thinks M&A may occur in the future.

“M&A picked up momentum in 2010 and continues to grow rapidly. We’re forecasting global deal activity to increase by as much as 40 percent this year, by comparison with 2010,” said Shabi in the statement. (Editing by David Cowell)

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