The fund, which is 50 per cent owned by French bank BNP Paribas, promises returns of 4 per cent to 5 per cent above the cash rate and a volatility of between 4 per cent to 8 per cent.

It has investments in about 130 underlying hedge funds based on strict entry criteria.

Fauchier Partners partner Tim Hatton said there was increasing interest from banks and pension funds to investin funds of hedge funds thanks to their diversified nature and low correlations.

Hatton said concerns over transparency in the hedge fund industry were justified but it was the job of a good fundof hedge funds manager to pick out the potential losers.

"We won't invest in a fund if we don't know it very well. We need a minimum level of risk data and at least two years of performance figures," he said.

"We look at funds where employees tend to have their own money invested because this aligns their interests."

Hedge funds are facing increasing scrutiny after US-based natural gas trader Amaranth Advisors lost $6.5 billionin a month.
Hatton, however, is unfazed by such blow-ups.

"This kind of thing is almost good for the industry. It means that the more skilled fund of hedge fund managers stand out," he said.

"It's like any industry. You have those who do it properly and those who don't do it properly - our job is to spot them.

"We chose not to include Amaranth in our fund because it failed our criteria."

Founded in 1994, Fauchier Partners has US$4.3 billion in funds under management. BNP Paribas bought a 50 per cent stake in the company in 2004.