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Liquidity, Transparency and Diversification
2004-04-14
Liquidity, transparency and diversification - our focus, at Access Capital Management, is to offer ?best of breed?, market-proven managers that deliver superior risk-adjusted returns.? The benefits of adding world-class alternative asset managers to your current portfolio include diversification (low correlation to traditional asset classes ? equities and bonds) and enhanced portfolio efficiency (better return potential for a given level of risk).
March was a highly volatile month in most sectors of the capital markets, with losses in each of the major North American indices (Dow: -2.14%, S&P: - 1.64% and NASDAQ: - 1.75%).? Trends in the currency markets were interrupted by a number of factors, particularly the Madrid bombings.? The decline in U.S. equities did not affect our managers as much as the moves in interest rates.? A weak U.S. jobs report mid-month sent interest rates plummeting.? A strong jobs report in early April propelled rates to their largest one-day gain since 1996.? In March, Vega?s funds suffered losses across the board ? the Global Fund experienced its first losing month in a year and a half (a streak of 20 positive months) and the Relative Value Fund experienced its first losing month since inception 27 months ago.? Vega?s short position on the long-end of the U.S. interest rate curve proved to be a somewhat premature, but ultimately correct view, as the rebound in early April has allowed Vega?s funds to recover (and then some) all of March?s losses.
March results emphasize the importance of diversification amongst styles and markets traded.? Sometimes diversification only helps limit the losses, as in March, but good managers bounce back quickly and difficult months for all styles are rare indeed.? Market-proven managers will outperform in the long run and view drawdowns, like those experienced in March, as a cost of doing business that ultimately sets the stage for the next profitable run.
Let?s get to the numbers.? The following are estimates for March (net of fees), together with YTD and 2003 results:
Trend Following Managed Futures March est.
YTD 2004 2003
Fall River Fund
-3.30% +9.14% +36.00%
Abraham Trading (Salem Futures Fund)
+0.90% +9.87% +74.65%
Aspect Diversified
-5.38% +2.96% +20.48%
Blackstar Fund
-1.27% +3.56% +26.00%*
Global/Macro Vega Global
-0.44% +1.10% +12.64%
Vega Feeder (2X Global)
-0.99% +1.85% +24.82%
Vega Liquidity
+0.10% +1.04% na
Vega Select
-4.73% -0.14% +35.08%
Vega Relative Value
-2.69% +1.01% +17.71%
Vega Diversified (25% per strategy)
-1.97% +0.88% +19.50%
Vega Diversified 2X
-3.99% +1.40% +40.50%
Taurus
-3.62% -0.21% +10.70%
Short Term Volatility Conquest Macro
-1.90% +0.72% +0.19%
Fund of Funds Pangea Alternative
-0.14% +6.68% +22.93%
Vega offers four distinct programs.? Vega?s risk-averse Global Fund has been profitable in 79 of its 87 months in operation, including 40 of the past 42.? Global?s portfolio of 200+ positions is focused in G10 fixed-income, currencies and equity indices.? Global is unique in that it targets LIBOR + 4% to 9%, with a maximum 6% loss limit in any calendar year.? Vega?s Select Opportunities Fund (EuroHedge?s Global Macro Fund of the Year for 2003) is a concentrated, aggressive version of the Global Fund, typically invested in 5 to 15 of the best Global ?ideas?.? This Fund, which commenced trading in June 2000, has delivered an average annual net return of 27%, with low-teen volatility.? Vega?s Relative Value Fund, EuroHedge?s Fixed-Income Fund of the Year in each of 2002 and 2003, is focused on non-directional G10 fixed-income strategies.? This Fund has delivered an average annual net return of over 20%, with a lower than bond-like annualized volatility of 3.5%.? Vega?s Liquidity Fund, launched in January 2004, is a ?hybrid? product responding to institutional demand for a highly liquid, ?money-market plus? alternative to short-term deposits and is designed to track (and outperform) short-term interest rates.
Fall River currently manages US$245M, with US$48.5M in the Fall River Fund.? The Fund?s loss of 3.3% in March, after a five month compounded gain of over 40%, was largely the result of losses incurred in the currencies and stock markets.? The Fund is designed to be continuously present in each of the 70 markets that it trades and does not attempt to predict the next big move, but rather minimizes losses while waiting for the next big move to occur.? The system targets those investors that can stomach a 10 to 15% drawdown, while shooting for 30% annual returns.? Fall River is led by Charlie Wright, a graduate of Harvard?s MBA program (1977), who has taught seminars and authored books on systems trading.
Abraham Trading's Salem Futures Fund, with a fifteen year audited track record, follows a systematic long-term trend following approach with the implementation of proprietary filtering techniques designed to improve the risk/reward profile of the trades.? The Fund managed a small gain in March (+0.90%), as losses in the financials (currencies and interest rates) was offset by gains in commodities, led by the meats.? The Fund avoids stock and stock index futures, as its system attempts to capture trends created by large fundamental catalysts that they believe are better expressed in the currency and interest rate markets.? The high exposure to physical commodity futures (60%), combined with the lack of stock and stock index futures, provides low correlation with other managed futures managers.? The Fund has delivered a 9.87% net YTD 2004, coming off a 74% 2003.
Aspect Capital manages in excess of US$2.5B and boasts a solid 15 percent plus five-year track record.? The Diversified Fund suffered a loss of 5.38% in March, led by losses in currencies and energies.? Aspect is considered one of the world?s premier systematic traders by sophisticated investors.? The Diversified Program applies two systematic and complementary strategies (Momentum and Break-Out) over multiple timeframes to a portfolio of over 100 markets (31.5% capital markets, 33% commodities and 35.5% currencies/interest rates).? Trading signals are generated over six distinct trading frequencies (from two days to six months), allowing for the capture of short and long-term market trends more successfully than an individual system.? Principals are former founders of AHL (now part of Man Group PLC), with a combined fifty years of quantitative trading experience.
Our short-term volatility program, Conquest Macro, has over US$400M under management, and employs a systematic strategy with an emphasis on capturing expansions in volatility via short-term trading in over 30 of the most liquid global markets (foreign exchange, fixed income, equity indices, energy, metal and commodities).? Conquest?s unique strategy offers low correlation to the broader managed futures sector and has delivered an average net return of approximately 17% since its inception in May 1999.
Pangea Capital is a three-year old fund of funds program, currently managing approximately US$41M.? Pangea managed a flat March, preserving its solid gains achieved YTD 2004.? Pangea is currently invested in 36 funds (10 that are closed) and earned a net 23% 2003 with a risk profile lower than that of a high-grade bond portfolio.? Pangea?s maximum drawdown since inception was 3.52% and the annualized volatility is 5.28%.? Pangea?s strategy is not concerned with predicting market direction, but rather, focuses on the exploitation of price discrepancies between related financial assets.? Pangea focuses on low-volatility funds, employing a dynamic leverage strategy designed to enhance returns, while keeping risk parameters within well-defined limits.
The Blackstar Fund is a multi-style, directional fund of funds, with an emphasis on managed futures.? The Fund, which commenced trading in December 2003 and experienced its first monthly loss in March, is backed by Tom Basso (featured in The New Trading Wizards).? Mr. Basso sits on Blackstar?s investment committee, and advises on the selection of managers and allocation of funds.? Blackstar places great emphasis on risk management, using both qualitative and quantitative criteria to select managers that will provide value within the overall portfolio.? On a pro-forma basis, Blackstar has earned an average net return in excess of 20%, with a maximum drawdown of 3.87%.
As always, kindly contact us for additional information on any of the funds.
Howard Lindzon???????????????????????John Cundari
602 315-8920?????????????????????????416 783-0663
?2004 Lindzon & Associates Money Management
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