Funds Hub

Money managers under the microscope

The bear necessities

June 10, 2009

BearGenuine non-correlation is flavour of the month in new hedge fund launches.

In English, that essentially means funds that don’t go down much when the market falls (we don’t seem to mind if a fund matches the market during a bull market).

On Monday 47 Degrees North, a firm backed by the Guinness family’s (of brewing fame) investment office, said it had launched a fund investing in electricity markerts, Middle Eastern and North African equities, insurance-linked securities and volatility arbitrage which is designed to have low correlation to equity markets.

And today Kiwi quant firm Pure Capital said it’s launching a fund investing in liquid derivatives with the aim of protecting portfolios in equity bear markets while benefiting during bull markets.

Pure says it has run a similar structure via a managed account structure since 2007, with returns of 79 percent last year and 21 percent year-to-date.

“The only thing that is sure to rise in a bear market is correlation,” says Pure CIO Anthony Limbrick.

Fund launches tend to mirror the last big trend in the market, because that’s what’s often fresh in investors’ minds, and these launches may be influenced by the recent bear market.

With markets on the way up, at least for now, it remains to be seen if these are the best strategies for current markets. But any fund that really can ride the bull and protect you from the bear deserves plaudits.

(See also A genuine rally or just bull?)

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