Deutsche Bank is launching a structured product that offers investors a long/short strategy married with the bank's proprietary equity valuation model, known as Croci (short for cash return on capital invested).

The open-ended fund is being offered in Singapore and will give investors direct exposure to the Croci Alpha Pairs Sectors index, which uses the Croci model to identify the cheapest and most expensive stocks across a variety of sectors. In all, the index is long/short in 70 pairs of stocks drawn from the US, Europe and Japan, and is rebalanced on a monthly basis.

"It's a classic market-neutral strategy that is enhanced by using the Croci investment strategy" says Vinod Aachi, Deutsche's Asia ex-Japan head of equity structuring and retail coverage. "It has historically provided quite robust, steady returns, especially in a flat-to-bearish market."

Deutsche's own simulation of the historical index performance reveals a neat line that rises consistently û absolute growth since 1996, when the original Croci index was first launched, is almost 325%, compared to 143% on the MSCI World index and 77% on JPMorgan's global government bond index.

The index delivers such stable returns thanks to a managed volatility strategy û when returns on the underlying pairs of stocks are volatile, the index cuts its exposure to the alpha pairs strategy back to a lower limit of 50%. When volatility is low it gears up the exposure to a maximum of 125%. This variable exposure aims to keep volatility down to 6%.

Diversification is another key selling point. The fund has generated consistent returns even as the equity markets have swung between boom and bust û its biggest single-month loss in the last 11 years would have been just 3.22%. While the government bond market has paid out a reasonably stable 5% a year during this period, the index would have given investors 13.7%, and with lower volatility.

Underpinning this strategy is the Croci methodology itself, which has strongly outperformed the S&P 500 since the bursting of the tech bubble in 2000. In effect, Croci is a way of comparing companies around the world on a like-for-like basis. It goes beyond the accounting data typically used by equity analysts to produce a real, inflation-adjusted value of a company's assets compared to the level of return and even puts a value on typically zero-rated assets such as brand and research and development.

The fund is denominated in US dollars and is compliant with the EU's Ucits III framework. It pays Deutsche Bank a 2% management fee and is sold through distributors in Singapore with a maximum subscription fee of 5%.

Deutsche's first two alpha pairs funds are already managing about Ç500 million of investors' money in Europe after the product's introduction there in late 2005. Aachi says that Deutsche has already got the go-ahead to introduce a long-only Croci product and the adoption earlier this year of rules that make it easier for Ucits III funds to be transferred to Singapore should pave the way for the introduction of other Croci products, such as commodity and currency funds.