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Alternative Market Briefing

Bob Treue's hedge fund up 19.2% through October

Thursday, November 16, 2017

Komfie Manalo, Opalesque Asia:

The year 2017 is turning out to be a good year for hedge funds. Data provider Hedge Fund Research says this year could be the best year for the industry since 2013 in terms of performance.

The Barnegat Fund Management's $648m fixed income relative value hedge fund is up 19.2% in 2017 (+0.7% in October), bringing its net compound annual rate of return to +16.5%/year since the fund's launch in 2001.

Hedge fund manager Bob Treue commented, "In fixed income relative value trading, we try and capture mispricings in the market. In a simple example, if we had one Treasury with a yield of 4% and another Treasury had a yield of 3% with the same credit, same maturity and same issuer, that would be a great trade. But, if that mispricing widened to 5% v 2.5%, we would suffer a mark-to-market loss."

Treue said that his fund would have a better opportunity looking forward. He also pointed out that this style of trading can be frustrating in the sense that the best time to invest is when the fund actually loses money (anomalous trades became more anomalous and Barnegat has better opportunities looking forward).

He added, "Conversely, when we make money, unless we find new trades and new anomalies, our opportunities have lessened."

One imperfect, but helpful indicator that Barnegat uses to look at the size of its mispricings is what they call 'Carry', Treue said. This represents the......................

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