Opalesque Industry Update:Ferox Capital LLP announced that its Salar Convertible Absolute Return Fund (“SCARF”) will shortly exceed the $100mm in assets mark. The Fund has performed well since launch, with NAV currently standing at 103.92*, a 6.6% annualised return from launch in September 2010. The Fund has managed to successfully navigate the difficult months of November and March, delivering positive returns in each month since launch. It has therefore been producing that return with an extremely low level of volatility.|
David Persaud and Alex Warren, the co-portfolio managers of SCARF (and both Partners at Ferox) are excited by the opportunity. Persaud stated, “SCARF targets a growing number of investor requirements: 8%-10% absolute return target, weekly liquidity, low vol – and unlikely to be correlated to much else in their portfolio. SCARF has the ability to hedge and uses robust techniques for protecting against losses. It is also UCITS, so very investor-friendly.”
Alex Warren explained how the product works to deliver absolute returns in difficult conditions, “It uses a combination of strategies: Firstly, we buy bond floor trades – outright convertibles close to the bond floor. This allows for upside participation and downside protection. Secondly, we look for synthetic put trades – 'in the money' convertibles equity hedged, offering the potential to make money in a falling market. Both strategies are asymmetric in that each trade risks less than the potential profit. Also there is considerable structural cheapness in both these subsets of the global convertible market. Coupled with diversification the combination of these two strategies is clearly compelling if your aim is steady capital appreciation."
Paul Sansome Head of Business Development and Investor Relations at Ferox Capital went on to say, “This product, which is on Morgan Stanley’s FundLogic UCITS platform seems to tick a lot of boxes for investors looking for liquid absolute returns. It has some tested techniques for protecting capital, it is a differentiated return stream that is relatively uncorrelated, and it benefits from regulatory oversight and the independent risk assessment of Morgan Stanley.