Wed, Dec 13, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Stonehenge Capital’s Forward Curve Realignment (FCR)hedge fund debuts strong returns one month after launch

Monday, October 24, 2011
Opalesque Industry Update - Florida-based asset management firm, Stonehenge Capital Management’s new direction neutral strategy Forward Curve Realignment (FCR) hedge fund debuted with a strong return one month after it was launched on September 1 this year.

FCR returned 0.3 percent in its first month of trading during one of the most turbulent market conditions, Stonehenge Capital Manager Steven Michael said.

According to Michael, FCR seeks to capitalize on the reversion to equilibrium of the forward curve following the distortions brought about by the rolling of contracts of established positions, primarily by long-index investors and speculators.

FCR will focus on investing in a variety of sectors (energies, grains, metals, softs and livestock) and markets in order to take advantage of reversions to equilibrium of the forward curve following distortions brought about by large capital flows.

Michael commented, “According to the CFTC, as of July 29, 2011, there was in excess of $180 billion (notional) in net long index commodities positions across 21 markets. Also, we believe that there is more than $100 billion managed by CTAs, and an additional $100 billion in commodities Exchange Traded Funds. Much of this total investment is held in nearby or front-month contracts. As these contracts near their expiration, non-commercial investors must exit their positions in order to avoid taking or making delivery of the physical commodities. This results in massive flows of capital. Most often, these large flows of capital do not exit the market, but rather shift to new positions farther along the curve in order to maintain their overall (long or short) directional interests.”

FCR uses several proprietary methodologies for analyzing these capital flows, allocating investments across all of the markets, and balancing the positions across both long and short interests using calendar spreads. The strategy employs internally-developed volatility and correlation analyses in order to keep overall volatility down, to reduce correlation of returns to the direction of the underlying market, and to achieve smooth margin to equity ratios, thereby increasing the efficiency of the deployment of capital.

Michael added, “We employ a proprietary methodology that holds both long and short spread positions in each market in order to minimize exposure to underlying market moves. We maintain positions at the front of the curve, never extending beyond the first year. Our model adjusts the relative long and short positions in order to minimize correlation to the underlying directional moves in each particular commodity. We aim to achieve a result which can be profitable in both an upward and a downward trending market of the underlying commodity and not restricted to making a profit only when prices go up (or down).”

By trading calendar spreads, the strategy seeks to avoid the effects of shocks to a market that are felt across the entire curve. Additionally, the strategy frequently holds both long and short spreads simultaneously within a market to further reduce shock risk.

Stonehenge Asset Management, sister company to SCM and manager of the Stonehenge Diversified 1 Fund believes that the addition of this strategy to its portfolio is keeping with its core philosophy that capital flows are the most tradable and consistent factor in price movements. “Both our intra-day and short-term trading strategies are based on this foundation, as well,” Michael said.

“We use proprietary means to adjust both our overall allocations to each market traded and to the sub-allocation within each market to each of the components of the trades described above. We attempt to keep a consistent deployment of capital using proprietary volatility analyses to reduce the overall capital required to target a particular level of volatility and to try to have a more predictable use of capital/margin,” he said.

To speak to Steven Michael,, please e-mail him at smichael@ stonehengeam.com or you can call him 561-952-1655 or visit www.stonehengeam.com...Corporate website: to Source
pd

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Mediobanca acquires majority stakes in Swiss hedge fund[more]

    Komfie Manalo, Opalesque Asia: Listed diversified banking group Mediobanca SpA said it has acquired a majority stake in Geneva-based hedge fund firm RAM Active Investments SA (RAM AI), an active and alternative asset manager offering a range of act

  2. Launches - Ex-BlueCrest team to open over $200m hedge fund, Greg Coffey, a hedge fund star who retired at 41, is eyeing a comeback, Brevan Howard plans Greek funds as bond rally signals revival[more]

    Ex-BlueCrest team to open over $200m hedge fund From Bloomberg.com: A team of traders who left BlueCrest Capital Management earlier this year raised more than $200 million for their own hedge fund focused on Asian stocks, according to a person familiar with the matter. Ovata Capital Manag

  3. North America - Miami could attract hedge funds if SALT deductions axed[more]

    From Law360.com: For years, inertia has been Nitin Motwani's greatest foe in his attempts to lure hedge fund owners in the northeast to Miami, which he has pitched as a tropical low-tax paradise. But with the Republican tax bill proposing to eliminate deductions for state and local taxes, he's sensi

  4. Northleaf Capital Partners closes debut private credit fund on $670M[more]

    Bailey McCann, Opalesque New York: Northleaf Capital Partners has closed its debut private credit fund - Northleaf Private Credit I - on $670 million. The vehicle will invest in private credit transactions in Europe and North America, with a primary focus on lending to private equity-backed compa

  5. Opalesque Exclusive: Credit Suisse Asset Management's NEXT Investors leads $6M Series A round for LUX Technology and Services[more]

    Bailey McCann, Opalesque New York: Credit Suisse Asset Management's NEXT Investors has led a $6 million Series A funding round for LUX Technology and Services, a business and technology solutions provider for the alternative assets industry. The investment will be used to fuel growth of Trans