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Matrix-PVE Fund raises over $100m, 'taking advantage of the unique opportunities in global credit markets’

Monday, October 26, 2009
Opalesque Industry Updates - Matrix Alternative Asset Management LLP (“MAAM”) and PVE Capital LLP (“PVE”) have joined forces to raise one of the most successful hedge fund launches in 2009 so far, which with further commitments will total some $150 million. The Matrix-PVE Global Credit Fund will take advantage of the unique opportunities in global credit markets by trading in a broad range of liquid credit instruments, both long and short.

PVE Capital will be the Investment Adviser to the Matrix PVE Global Credit Fund . PVE’s CIO is Gennaro Pucci, formerly of Credaris, where he was Head of Trading (2005 to 2009) and responsible for the management and trading of funds in excess of $1billion. Gennaro also managed the Credaris Credit Fund (formerly called the Credaris Correlation Fund) which generated a performance of 5% in 2005, 26% in 2006, 58% in 2007, 56% in 2008 and 13% in 2009 (Jan to April). This fund was nominated for Best New Fund and Best Credit Fund at the 2008 EuroHedge Awards.

PVE Capital LLP (“PVE”) was formed by Gennaro Pucci, Joe Vittoria and Christian Evans. Rachel Barnard joined as partner subsequently and collectively, they have more than sixty years industry experience. PVE is wholly owned by its partners, and controlled by Gennaro Pucci.

Gennaro Pucci, CIO of PVE Capital LLP, said: “The fixed income market is currently offering opportunities that have rarely been seen in the last 10 years. Managing money over the next three years will require a good understanding of the risks that currently prevail and that could develop.

“After most of the beta has been captured in 2009 we now see substantial opportunities by identifying value, and then allocating and trading both long and short across different credit instruments and strategies in order to optimize the level of expected return. This is the perfect environment for alpha generation and we believe investors should now start looking favourable again to long/short strategy. Market will still be characterised by what we believe is going to be a long deleveraging process. Volatility should continue to accompany the recovery path initiated at the beginning of the year.

Chris Merry, CEO of Matrix Alternative Asset Management LLP, said: “We are delighted to have launched the Matrix-PVE Fund with Gennaro Pucci and his team. The combination of the team's investment skills and the existing Matrix infrastructure, including risk management has been well received by Investors"

Key highlights of the Matrix-PVE Global Credit Fund include:

Strategy: The Fund will express a strategic macro credit view using the most appropriate credit instruments to achieve high annualised returns. It aims to deliver these in a variety of market conditions by fundamental analysis and active trading.

Prime Broker: Credit Suisse

15% to 20% annualised net returns
Target Returns: 8% to 9% annualised volatility
Low correlation with other asset classes

Leverage: Target 3 times gross leverage

Investible Universe: The investible universe at this stage in the credit cycle will include; Credit Derivative and Quant Strategies, Single Name Credits and Secured Investments (ABS)

Current opportunities:

The fixed income market is currently offering opportunities that have rarely been seen in the last 10 years. We believe that the majority of value to be generated by beta has already been extracted. We see substantial opportunities by identifying value, and then allocating and trading both long and short across different credit instruments and strategies in order to optimize the level of expected return. The Macro overlay, Credit Derivative & Quant strategies are designed to exploit opportunities as well as limit volatility across the Fund. An optimal rebalancing will allow us to capture the most interesting themes through an always chancing credit cycle.

Current opportunities are arising due to:

• Continued deleveraging and central bank policy - Central banks have expanded their monetary bases by up to 3 to 4 times by including ‘off balance sheet’ transactions, quantitative easing and the printing of money. Although central bank policy might have been necessary to avert a deeper recession their action will likely pose further risks for a stable recovery and likely make the path to recovery volatile.
• Rating agency methodology – Recent rating methodology change will exacerbate the CDO deleveraging still taking place.
• Valuations - Asset valuations continue to discount adverse scenarios in many areas.
• CDS - The latest rally in corporate credit has been very broad but many opportunities are still available on a relative basis. The standardisation in the CDS market should help improve liquidity and margins.
• Risky assets rebounding - Risky assets have rebounded towards the end of the second quarter of 2009 with new cash being available.

We see potential opportunities developing as:

• Bank lending is still insufficient to ensure a stable recovery and governments are facing large deficit problems.
• The US mortgage market is still characterised by negative equity, with most of the prime residential market having only 10% of equity left.
• The commercial real estate market still represents a big risk for financial institutions with important funding gaps to be filled in next 3-4 years
• The path of Corporate defaults is still rising.

PVE Capital is a newly formed LLP, which has entered into a joint-venture with Matrix Alternative Asset Management LLP (MAAM). MAAM will provide a proven operations and risk management infrastructure, allowing PVE Capital to focus on investment management.

Matrix Alternative Asset Management LLP (MAAM) appoints experienced fund managers who have taken risk in many different market environments, have strategy specific expertise and are accustomed to operating within a risk management framework. Increasingly hedge funds are viewed as an important component of a diversified portfolio and are well established as an asset class. Their aim is to produce positive absolute returns in any market environment and be uncorrelated to other asset classes.


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