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F&C’ systematic European L/S equity fund up 29.7% on 2nd anniversary, managers predict stock dispersion set to rise in 2010

Monday, January 25, 2010
Opalesque Industry Update - F&C Zircon Fund, a systematic European long-short equity fund managed by F&C Alternative Investments, has reached its second anniversary. Since its inception in January 2008 the Fund has demonstrated consistent performance in both bull and bear market conditions, returning 29.77% (since January 2008 until the end of December 2009) with an annualised daily volatility of 7.71%.

The F&C Zircon Fund invests within the Stoxx 600 universe with a particular emphasis on the statistical arbitrage of pairs of stocks, i.e. taking a long position and short position on two stocks in the same sector, to create a diversified portfolio of long and short positions.

The portfolio managers, Darren Jordan and Phil Robinson, aim to capture excessive and unwarranted short term dispersions between pairs of stocks. Trade signals are generated by a proprietary model developed by the team which is overlaid by disciplined risk parameters and a liquidity screen that ensures that the focus is on large and mid cap stocks.

Darren Jordan, co-manager of the F&C Zircon Fund, commented: “Although we finished the year with a respectable 9% return following a 19.1% return in 2008, 2009 was a frustrating year for mean reversion market neutral strategies. We strongly believe that 2009’s lack of dispersion was simply a reaction to the previous year’s sharp decline in markets and high stock volatility. However on a risk-adjusted basis 2009 was a better year than 2008 and the success rate of our trades was higher.”

The fund’s absolute return of 9% for the year was achieved with a daily volatility of just 3.85% and a 1.6% daily drawdown (Peak-to-Trough).

Phil Robinson, co-manager of the fund, commented: “We are confident that 2010 will be a much more interesting year for us. The return of stock pickers will help raise dispersion which should enable us to find a greater number of trading opportunities.”

Darren and Phil have been working together for over 12 years. They joined F&C Alternative Investments, the single strategy hedge fund division of F&C Investments, in the summer of 2007 after four years of running a partnership business which developed and traded a similar systematic strategy.

The F&C Zircon Fund, which has a minimum investment level of €500,000, has Euro, Sterling and US dollar share classes. Current investors include pension funds, discretionary wealth management managers and family offices. The Fund is domiciled in the Cayman Islands with a listing on the Irish Stock Exchange.

F&C Asset Management (F&C) is an independent London Stock Exchange listed asset management group with around 100,000 shareholders. F&C is an active fund manager with a multi-specialist investment model. It manages £99.2 billion (€108.5 billion) of assets (as at 30 September 2009) for a diverse range of institutional, insurance and retail clients across all major asset classes – equities, bonds, cash and property – as well as alternative and specialist product classes. F&C invests globally and has been a longstanding investor in emerging markets.


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