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Alternative Market Briefing

Long volatility overlay helps HEI fund to profit when investors become more risk averse

Monday, March 29, 2010

From Sagar Chakraverty, Opalesque Asia:

Hedged Enhanced Income Fund (HEI), an $8.3m liquid multi-asset market neutral fund, was launched in March 2010 in an LP structure, after being a managed account between April-09 to Dec-09 and returning 12% then.

In Jan-10, the managed account trading returned 0.7%, after which trading was terminated in order to liquidate securities so as to transfer cash in HEI.

The fund’s investment advisor is New York and London-based Thomas Funds, a specialist in hedged multi-asset portfolios founded by Manit Rye and Glen Cremer.

HEI fund strategy Being market risk averse and targeting a return of 8% to 12%, the HEI portfolio follows two strategies – investing in hedged income generating assets and maintaining long option positions on multiple assets.

The hedged income strategy is invested in three kinds of portfolios, each having 75 to 100 securities. The first is a portfolio of high yielding dividend stocks with market and sector options. Then, there is a portfolio of high yield fixed income assets hedged with debt and equity options. And finally, there is a portfolio of Real Estate Investment Trusts hedged with sector options. This strategy targets a net return of 5% to 8%.

The multiple option overlay strategy allows investors to bet on price or volatility fluctuations in multiple-assets such as gold, commodities, emerging market equities, bon......................

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