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Alternative Market Briefing

The Corona Fighters Report 22: Asset managers who delivered in the downturn

Tuesday, May 05, 2020

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B. G., Opalesque Geneva:


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


The edge is in gold

"We have entered a time of permanent deficit spending and blunt debt monetization," says Mark Valek, portfolio manager at Incrementum AG. "Global central banks are enabling a gigantic spending spree which is unprecedented on this scale. We are moving closer to a dangerous economic experiment which is leaning towards the implementation of the so-called 'Modern Monetary Theory'."

Meanwhile the Incrementum Digital & Physical Gold Fund has been live for over two months and both share classes are positive (+16.75% USD-S; +18.83% USD-A) - since inception on February 26. The AIF fund invests in physical gold and 'digital gold' (Bitcoin) and generates income through rebalancing and options.

Incrementum AG is a firm specialised in commodity and crypto investments based in Liechtenstein and founded in 2013.

"The extreme volatilities associated with investments in digital value storage such as Bitcoin can be significantly reduced by combining them with physical gold," says the fund website.

"Both physical gold and digital gold are very limited in their range. The globally available amount of physical gold is constantly increasing by around 1.5% annually. Gold is therefore considered the hardest money in the world. Bitcoin, as digital gold, has a steadily increasing degree of hardness and is absolutely limited in its amount. In an environment of over-indebtedness and strong monetary inflation on the part of central banks, these investments therefore have strong revaluation potential."

The positioning of the fund as of April 28 is 60% gold (physical, futures, and options), 11% silver (futures and options), 26% Bitcoin, and 3% neutral.

Some of the world's largest hedge funds are raising their bets on gold, forecasting that central banks' unprecedented responses to the coronavirus crisis will lead to devaluations of major currencies, reports the FT today. That includes Paul Singer's Elliott Management, Andrew Law's Caxton Associates, and Danny Yong's Dymon Asia Capital. Gold has risen about 12% this year.

Gold prices - 6 February 2020 to 4 May 2020 (Oz - USD)

Source: www.gold.org


Tricky times but great trading markets

The Arnott Opportunities Fund, which invests in uncorrelated opportunities, returned 6.3% in March and 7.64% in April (est.) (over 7% YTD). The fund was launched in 1999. It has annualised almost 22% since May 2013, compared to almost 5% for the MSCI.

The strategy is equity long/short with a macro overlay. According to a presentation reviewed by Opalesque, the portfolio is set up for a broad range of market outcomes; it uses dynamic stops and profit targets to assess payoff of individual bets, and typically has 50 to 70 positions.

"In 1990, I went to Memphis and worked for Paul Tudor Jones Uncle, Billy Dunavant. His style was to 'find asymmetric investment opportunities and when you do, bet big. And when you don't find those opportunities, don't bet'," says portfolio manager Kenny Arnott. "That became the mission statement of Arnott Capital. And our results prove we have not deviated from that mission since I founded Arnott Capital in 1999." Arnott Capital is based in Sydney, Australia.


New manager trading volatility and derivatives

The QVR Absolute Return fund returned +52.5% in March, +7.5% (est.) in April, and +59.7% YTD (est., to end-April). "Hedged positions in dividend futures helped, as did option positions which benefited from the volatile move lower in oil prices," an investor told NYTimes.

Launched in August 2017, QVR is a global multi-asset volatility and derivative strategy focused on liquid products. It is made up of quantitatively driven, low-frequency strategies guided by models but managed on a discretionary basis. "Derivatives strategies make bets on probabilities of different outcomes, deriving uncorrelated alpha from dislocations and erratic market behavior," explains a presentation reviewed by Opalesque. "Derivatives strategies ultimately derive their alpha or asymmetry from explicitly or implicitly providing liquidity to the end-users of options markets."

QVR Advisors is based in San Francisco and was founded in 2017. CIO Benn Eifert used to be the co-founder and co-portfolio manager at Mariner Coria.


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Last issue of The Corona Fighters Report: Report 21.

To see all past reports, type Corona Fighters in our search engine: www.opalesque.com/index.php.


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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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WEBINARS:

VIDEO REPLAY of CORONA FIGHTERS - Episode 1 webinar:

Watch the replay here: www.opalesque.com/webinar/#pw4

Meet five Managers and learn how and why their strategies delivered positive returns and/or protected capital during the Corona led market meltdown in one hour!

"A well-chosen topic of discussion and a great set of speakers to hear and learn from."
"I enjoyed the webinar and found the introduction to the strategies to be diverse and insightful.
"Very resourceful and insightful."

700 people registered for the CORONA FIGHTERS - Episode 1 webinar.


Don't miss EPISODE 2

Time: Tuesday, May 19th 10 am EST
Register: https://www.opalesque.com/webinar/

You will be able to tune in to this webinar from any computer, tablet, or smartphone. The webinar will be recorded - in case you are not able to join, all registered participants will be provided a link to replay the webinar.

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