Bank of Bermuda's hedge fund, which began trading in October 1999, has achieved $118 million to date, it was announced on Tuesday at a special presentation at the Bermuda Underwater Exploration Institute.

The All Points Fund of Funds Alternative Class is the newest addition to the bank's stable of funds and its only hedge fund. Adrian Fairbourn, head of investments in Europe for the Bank of Bermuda, was in the Island to explain the fund's structure and principles.

Mr. Fairbourn said: "We hope the performance we have shown with it over the last few months we can achieve in the future.'' Since the first fund of hedge funds was launched in 1984 there are now around 5,000 hedge funds which have about $400 billion under management. It is a growth area and Mr. Fairbourn said: "The hedge fund industry is at the same point of evolution as the mutual fund industry was at the beginning of the 1980s.'' He said there is no simple definition of a hedge fund, but hedge fund managers are very highly focused on defined niches.

"These funds typically attract the most highly skilled investment managers in the market place and their risk adjusted returns are superior to traditional asset classes. The net effect of adding a proportion of hedge funds to a balanced portfolio is to reduce risk.'' The Bank of Bermuda's All Points Fund is a joint venture with two other major investment houses; the Swiss banking branch of Banco Santander Central Hispano and Notz Stucki & Cie, a long standing investment house in Geneva which is also the official adviser to the fund.

Mr. Fairbourn explained the bank's fund of funds benefits from having 17 managers in it. "We all remember Long Term Capital Management's fall (a single manager hedge fund). With 17 managers if one does blow up you still have 16 to keep the fund going.'' The bank operates a constant monitoring process of all existing and potential managers for the fund. They are screened and their performance and strategy assessed. "We are looking for value in any market conditions,'' he said.

"We are really an art gallery for these peoples' talents. we go and find them and we package them up for the investors.'' He feels the bank's charging policy on the fund has proved a major competitive advantage. "Unlike many hedge funds of funds we are charging no performance fee for the Alternative Class. We just charge a wrap around fee of 1.75 percent inclusive of advisory, custody and administration fees.

"Also returns are not highly correlated to traditional equity markets. This fund can provide significant protection against any dislocation/correction in global equity markets. Performance has shown that clients can receive increased returns with a lower risk profile.'' Growtth: The Bank of Bermuda's Adrian Fairbourn