Opalesque Industry Update – Potomac Portfolios announced today that clones of its Potomac Select Series III Fund are being made available to qualified investors via the AlphaMosaic Managed Account Platform and that further distribution under AlphaMetrix sponsorship is in the works through a variety of other platforms. |
Potomac has been providing managed futures products to individuals, family offices, hedge funds, and institutions since 1997, following successful careers by its principals in investment banking at Goldman Sachs, Blyth & Co, the World Bank, in private equity, and commodities trading as a CTA and CPO. AlphaMetrix LLC (www.AlphaMetrix.com) is an independent provider of CTA and hedge fund managed account and governance solutions headquartered in Chicago, IL, recently ranked in the top quartile of Inc. Magazine’s “Inc. 500” as the 7th fastest growing financial services firm.
“Potomac’s multi-advisor Potomac Select Fund has been allocating to managed futures via AlphaMetrix for over four years now,” said Thomas Lott, Potomac’s President, “so in that sense we are delighted, in a role reversal of sorts, to offer our product to AlphaMetrix clients, as well as to clients of U.S. institutions, banks, and national and regional investment advisory firms through their own respective platforms.” Mr. Lott said that the new AlphaMetrix sponsored funds will gather non-correlated “alpha” exposures in a broadly diversified pool of advisors at low minimums.
From inception in 2006 through September 2010, Potomac Select has generated a 18.95% cumulative return, compared to respective losses for the SP500 of -1.55% and for the HFRX U.S. Global Hedge Fund Index of -2.19%.
“Our best upside period,” said Lott, “coincided with the worst recession this country has seen since the Great Depression. In 2008, while stocks plummeted 37% and hedge funds 23%, Potomac gained 26% on 4% downside volatility as the Fund’s mix of uncorrelated managers remained uncorrelated, in spite of gathering correlations amongst most asset classes,” he said. “It’s all about massive diversification,” he continued.
“Potomac is allocated to 10-20 managers trading over 160 instruments, long and short, across more than 300 models, in equity index, fixed income, currency, and commodity futures, with a daily book of 1,500-3,000 small positions among managers whose pair wise correlations are close to zero,” said Lott. Potomac’s correlation with the SP500 has been running at negative 0.11% since inception.
Looking ahead, Lott offered that managed futures seemed poised to exit a performance trading range defined by the economic stimulus deployed since the recession. “Global stimulus has overwhelmed the fundamentals since the recession,” said Lott, “as managed futures has had to succumb to a ‘risk-on/risk-off’ mentality among investors. With GDP growth slowing, sovereign balance sheets deteriorating, quantitative easing back on the table, and countries racing to devalue, long volatility strategies seem poised to thrive,” he said.
“Whether we recess again, or inflate our way out of the growth conundrum doesn’t really matter, “he said. “What matters is that markets move and with the elections behind us and QE2 clarified and quantified, this is just what we are seeing.”