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Alternative Market Briefing

Investors seeking downside volatility management strategies anticipating eventual market drops – Sherpa Asset Management

Friday, March 04, 2011

From Kirsten Bischoff, Opalesque New York:

Vancouver-based Sherpa Asset Management views the June 2008 launch of the firm’s Sherpa Diversified Returns Fund as “fortunate timing in hindsight” even though they took the equity long/short fund out into the most volatile equity markets in recent history. By the end of the first year of operations the fund returned -5.96% compared to the fund’s benchmark the S&P 500, which was down -34.37%, and in the two years of recovery from the financial crisis the firm has posted +19.72% in 2009 and +12.15% in 2010.

As a result of delivering on their promise to run a strategy focused on North American large-cap equities, utilizing a proprietary options trading strategy to build in a protective hedging feature, Sherpa has not seen any redemptions since their launch, and has since launched a second fund. “The fund is well ‘on model’, meaning it has delivered on its objectives,” Sherpa’s David Guarasci told Opalesque. The fund was recently awarded a mandate from a well-respected Canadian pension plan, which Guarasci says is largely due to the well-defined process the firm uses to lower volatility to provide a protected equity profile.

“Everyone knows that they have to be invested in the equity markets, but they also know that eventually there will be another market drop,” he says. “That will happen again in the next five to ten years, or maybe sooner. No one wants to sto......................

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