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Amid the current market turmoil, this is our regular report on hedge fund and alternative asset managers who are bucking the trend.

Volatility as an asset class

ABR Dynamic Funds ABR 75/25 Volatility Strategy returned +22% in March, +18% YTD, annualising +18.9% net since its 2006 inception. The strategy is a blend of 75% ABR Dynamic Blend Equity and Volatility Index plus 25% ABR Enhanced Short Volatility Index. Using ABR's proprietary models, the strategy incorporates long volatility exposure to target significant gains in extended periods of high volatility (Crisis Alpha) while using short volatility exposure to seek to harvest the volatility risk premium in normal markets.

The fund believes volatility can be treated as a distinct asset class. Given current uncertainties around the virus, it is likely that investors will see both significantly increased realized volatility as well as big episodic moves. Both can contribute positively to volatility trading strategies.

Taylor Lukof is the Founder/CEO and a Fund Manager at ABR Dynamic Funds. He has over 15 years of investment experience and was formerly a partner at Toro Trading LLC, where he co-managed equity derivative trading strategies.

Relative value volatility

California-based Headwaters Solutions' flagship Headwaters Volatility Fund was up 3.51% in March and is up 57.29% year to date.

The fund runs a relative value volatility program designed to capture upside as volatility markets move. The strategy analyzes equity pricing, credit spreads, interest rates and volatility markets to identify mispricing while focusing on catalysts that drive volatility. The fund goes long volatility when signals indicate an opportunity. The strategy is offered in a separately managed account structure with customization available.

Long volatility strategies are back in fashion as markets have struggled to parse the economic fallout around coronavirus. The March selloff provided new opportunities for volatility traders, but April has been a quieter month as equities markets trended higher on hope. It's too early to tell if that hope will last, but it seems unlikely given the lack of empirical evidence suggesting that hope is warranted.

Headwater is run by Matthew Rowe, Managing Partner and Chief Investment Officer and Jennifer Dowling, Partner and Chief Financial Officer. Matt has over 20 years of experience managing global portfolios, teams and risk in multiple strategies and asset classes including Convertible, Capital Structure and Merger Arbitrage, Volatility, Correlation, Fundamental and Quantitative. Jennifer's background incorporates a breadth of multi-faceted public and private sector experience from the Federal Communications Commission and nonprofits to startup and established technology firms to banking and corporate finance.

Finding opportunities in emerging markets

Nipun Capital's Emerging Markets Strategy has outperformed the MSCI Emerging Markets index by 3.4%.

The Nipun Emerging Markets Strategy attempts to take advantage of the inefficiencies in emerging markets while being focused on downside protection. It has a high active share of over 90%. The fund looks for mispricings in stocks as well as country specific differences in how stocks trade. The strategy also holds some defensive positions for downside protection.

The Nipun team is currently 15 professionals of which 4 were Managing Directors at BGI/BlackRock. Nipun's founder and portfolio manager, Pooja Malik, worked at BGI for almost 10 years within the active equity team and held a variety of roles including Head of US Small Cap Active Equity, co-Head of US and Global Equities and Head of Portfolio Management for North America.

Coronavirus has exacerbated volatility in emerging markets as many EM economies were the first to close in response to the virus spread. Now, as they begin to reopen, many trade partners are still closed dampening export demand. Central banks and sovereigns are working through plans that will help vulnerable companies weather the crisis. Emerging markets investors can expect to see higher volatility for the foreseeable future. But, new opportunities may emerge for skilled managers that can identify quality companies.

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Prior issues of The Corona Fighters Report:
Report 1; Report 2; Report 3; Report 4; Report 5; Report 6; Report 7; Report 8; Report 9; Report 10; Report 11; Report 12; Report 13;Report 14; Report 15; Report 16; and Report 17.

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Disclaimer: This is not investment advice. Opalesque has not verified this information and gives no warranty of accuracy or completeness. Past performance is not indicative of future results. See our Terms & Conditions for more information.

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