global macro players are best placed to take advantage of uncertainity in world markets
Stenham Advisors this month launches a fund of global macro funds targeting returns of Libor plus 10%-12%pa.
The group, which has just passed the $1bn asset mark, said volatility on the product is likely to be "relatively high".
Harry Wulfsohn, a director at Stenham Advisors, said the firm expected global uncertainty and downside risk to favour global macro managers who trade liquid instruments and can reposition their portfolios quickly to exploit market opportunities.
According to the group, the seven underlying managers it intends to use have produced a combined annualised net return in the past three years to September 2005 of 15.51%. The global macro fund is the latest addition to Stenham's existing family of single-strategy funds of funds (see table).
"At the moment, we feel there is a lot of downside risk in the markets, and companies' profits will be under pressure in 2006, which will make their price/earnings ratios now look very high," Wulfsohn said.
"There is a bond bubble, commodities are volatile and the dollar has short-term strength but, fundamentally, is weak. We think it will be devalued when the market perceives interest rates have peaked.
"Global macro players are best placed to benefit from that because they trade very liquid assets and can reposition themselves very quickly."
Kevin Arenson, chief investment officer at Stenham, said the firm could take in around $250m extra monies over the next 12 months, and its hitting $1bn would not deter its focus on managed growth.
"Having between $1bn-$2bn is a good size because we are big enough to allocate a meaningful amount of money to each hedge fund, but we are not so big to want to dominate the investor base of the individual hedge fund," he explained.
Global macro fund targeting Libor plus 10-12%pa.
Seven underlying managers in the fund of funds.
They have produced 15.51% net annualised returns over last three years.
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