Hedge Fund Inspires Deutsche Certificate

In an interview with AsiaHedge one of the founders, Frank Holle said, “Our multi-factor model is looking for value stocks with earnings momentum (growth at a reasonable price). Sometimes the market directs us more towards growth, sometimes more towards value but we always work with fundamental factors related to earnings and valuation, we do not use technical analysis. The algorithms behind those factors are secret but we are pretty open about the factors themselves and can show investors historic portfolios. Every month we publish the top three sectors and countries and the aggregate momentum and valuation weightings,”

The hedge fund runs on some pretty ‘dynamic’ principles. “The dynamic weighting process of factors is the key to our fund,” says Frank Holle, who together with Chatchai Ngampakdeepanich set up QAM in 2004. “The reason we can run the fund with no human interference is because we use multi-factor models that are dynamic. On a frequent basis the computer will look at what’s happening in the markets, then the portfolio is rebalanced on a monthly basis and the factors get re-weighted,” he says.

Euronext has listed the certificate; Deutsche Bank will make a daily market on the instrument and a euro hedge strategy is applied so that investors can receive a return denominated in euros.

There are currently $80 million in assets under management, with a global equity fund of $45 million. The target is to gradually build this fund by another $100 million. The annualised return of the global fund is 31.6%. The fund’s is located mainly in the US and South Korea, with 17.2% and 12.3% of the portfolio respectively.

Holle was a director of Merrill Lynch in London before starting a long/short hedge fund in 2001. Khun Chatchai previously worked at Thomson Financial. He is the computer specialist of QAM and has a history in computer engineering.