David Ahn's Bermuda-based Technology Multi-Fund hedge product refocuses its investment strategy as market changes
The GAM Technology Multi-Fund is concentrating its investment strategy this year on shorting stocks.
The fund of hedge funds product has approximately 10 managers who each use a wide array of investment approaches. However, GAM believes in the current market environment hedging techniques such as resorting to cash and shorting should be used.
Shorting involves selling securities in anticipation of being able to re-buy them at a future date and at a lower price. The skill of short selling is down to the manager's assessment of the overvaluation of the security. It is often used as a hedge to offset long-only portfolios and by those who feel the market is approaching a bearish cycle.
David Ahn, manager of the GAM Technology Multi-Fund, said: 'The environment is not conducive to long buying strategies and we like to stick with managers who have the flexibility to be able to reduce their balance sheets.
'As it is a very volatile sector, we steer towards managers who do not use leverage and also monitor the risk controls of the underlying managers.'
GAM chooses managers through a bottom up process. The company looks at the investment strategy of the underlying managers and funds and makes sure it is in line with GAM Technology Multi-Fund's investment strategy. GAM has a database of over 40,000 funds where potential managers can be chosen.
Managers are chosen using both quantitative and qualitative methods. GAM has regular, detailed interviews with its managers and investment policies and philosophy are reviewed regularly.
The portfolio encourages a diversity of different investment styles. It is entirely up to the fund manager as to what technology sector they would like to invest in. Ahn said: 'The internet was a primary driver in 1999, however valuations have come to levels where people have not identified what the main story is.'
He explained the outlook for technology markets over the next six months is challenging. Managers are using their research capabilities to assess whether investment sentiment accurately reflects company results and forecasts for the second half of 2001.
He continued: 'Although most managers are in capital preservation mode, later in the year more investment opportunities will arise as negative sentiment becomes overdone.'
The fund consists of managers who specialise in software stocks, the internet, telecom and hardware. All strategies are geared towards absolute return. Top 10 holdings include GAM Equity No. 25 (Galleon Technology), Camelot Offshore Fund B, Chilton New Era International Fund B, and ACM Technology Hedge Fund.
GAM Technology Multi-Fund is domiciled in Bermuda and has £27.8m ($39.1m) assets under management. Minimum investment is £10,652 ($15,000) and the annual fee is 1.76%.
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