fund will target long and short opportunities using a bottom-up stockpicking approach
Ex-Schroder's income manager Ian McVeigh will launch his global macro fund on 1 July aimed at capitalising on what he believes is a change in the economic cycle.
At launch the Parkway Global Fund, targeting 15% plus annual returns with 10% volatility, will use a number of different strategies including arbitrage/pairs, options and directional trades. Assets will be split with 30% to 80% in equities, 10%-50% in bonds and 0%-20% in currencies.
With 30-35 holdings the fund, managed by McVeigh and his partner in the investment boutique Parkway Capital, Nicholas Carn, is open to institutions and qualifying individuals for a minimum investment of $250,000.
The two aim to make its returns by anticipating the markets and acting ahead of them. Carn and McVeigh believe what gives them the edge over many hedge fund managers is their approach to stockpicking, which involves both top-down and bottom-up processes.
According to McVeigh and Carn, the global economic cycle has moved from the short 'Kitchin' cycle to the long 'jugular' cycle. The Kitchin cycle involved short inflationary cycles characterised by the post World War Two years. The cycle ran from inventory adjustments, leading to interest rate cuts, to recovering demand, to falling unemployment, to inflationary pressure, to the central bank raising interest rates and back to inventory adjustments.
The jugular cycle involves long capital investment led cycles. Interest rate rises lead to returns on investment falling, which leads to a financial crisis/debt inflation, to recovering financial confidence, to an investment boom, to rising unemployment and back to interest rate rises. We are now in the early stages of a downswing in this cycle, according to McVeigh.
McVeigh and Carn use the Jugular model with macro economic data to determine when and where the next opportunities on the long or short side are going to appear. Then they look at local economic data and company information to determine long and short positions.
The fund manages risk by stress testing the portfolio as a whole ' looking at possibilities of what could go wrong, the potential losses and how to minimise them.
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