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New York (HedgeCo.Net) – Credit Suisse’s Quantitative Equities Group released a new whitepaper, “Equity Market Neutral: Diversifier Across Market Cycles,” outlining the potential benefits of an Equity Market Neutral strategy. The paper details the various types of Equity Market Neutral funds as well as the traits which have historically helped the best managers stand out.
Equity Market Neutral (EMN) funds have been generally successful in profiting from a variety of environments and have provided an effective counterbalance in diversified portfolios during periods of market volatility, such as following the Lehman Brothers bankruptcy in September 2008. The findings of the paper suggest that:
EMN is a potential diversifier given the low beta it showed to the 2008 equity markets in what was a historically volatile year
EMN has lower annualized volatility than other hedge fund strategies over the long term and has provided generally positive risk-adjusted returns over the last ten years
After the significant market dislocation experienced by quantitatively managed funds in August 2007, many managers increased the range of data used, including building proprietary data and risk models, in an effort to try to mitigate the effects of a future mass deleveraging event
In order to achieve diversification within the strategy, investors should seek managers who work with a range of uncorrelated factors and proprietary models in order to avoid crowded trades. This diversification of factors and models was a key element in the strategy’s ability to weather market volatility in 2008 and will likely remain the cornerstone of alpha generation for the strategy going forward in the near term
EMN managers see the post-Lehman landscape as opportunity-rich for the strategy because there is less capital being deployed as well as less competition in program and high-frequency trading.
Editing by Alex Akesson
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HedgeCo.net (West Palm Beach) – Cinneas Foreign Exchange LLC, an alternative investment management firm specializing in momentum based trading in the foreign exchange market, have announced the launch of a Commodity Trading Advisor (CTA).
The Cinneas investment process combines technical, fundamental and intraday market flow analysis with the careful application of leverage for the purpose of delivering non-correlated returns, preserving capital and mitigating risk. Cinneas offers a low barrier to entry with a minimum investment of $5,000 with no lock-up period.
Cinneas was founded by Morgan Stanley veterans Michael Myrtetus and Douglas Borthwick. Myrtetus and Borthwick met in 1996 when Douglas joined Morgan Stanley’s foreign exchange trading team. At that time Morgan Stanley’s FX business had revenues approximating $200 million. Over the 9 years they worked together, the business grew to approximately $1 billion.
"We believe that an actively managed, globally diverse portfolio can adapt and grow with the changing markets," said Douglas Borthwick, Managing Partner. "Our approach draws upon global economic, fundamental, and technical analysis to identify momentum trading opportunities, with the ultimate goal of producing non-correlated risk-adjusted returns."
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
Street.Com – In a fact sheet about the fund, which engages in several arbitrage strategies, AQR outlined plans to take advantage of a lack of liquidity in the "thinly traded" SPAC market.
A spokesman for AQR says the firm is not concerned that it missed the height of the market last fall, since it expects attractive risk-adjusted returns for some trades.
Reuters – In a period when volatile markets battered most hedge funds, global macro funds are proving their worth, Graham Capital Chairman Kenneth Tropin told Reuters.
During one of the hedge fund industry’s worst years, Graham delivered gains of up to 41 percent in 2008 by making good bets on currencies, stocks, interest rates and commodities. And because the firm invests in highly liquid futures, clients had monthly access to cash even as many funds blocked withdrawals.
The combination of liquidity and returns that are independent of the broader market could revive interest in global macro funds, Tropin said.
"For a long time there was a perception that the biggest returns, the best risk-adjusted returns, were in other strategies. Then we had a market environment last year where most hedge fund styles ended up being correlated to each other and to the equity markets as well," he said.
Graham manages $4.9 billion in assets in human-directed funds and computer-driven quantitative funds. Funds in both categories invest across fixed income, currency, commodity and equity futures.
"Our style of investing offers some benefits, including liquidity and diversification, that may have not been appreciated as much as they should be," he said.
Graham’s quant funds gained from 20 percent to 41 percent last year, while human-directed funds rose by 6 to 27 percent. By comparison, the average hedge fund lost 28 percent.
