Nostradamus Sees $10 Million FOF Allocation

By Jacob Bunge, Financial Correspondent
Friday, December 14, 2007 7:21:02 PM ET

NEW YORK (HedgeWorld.com)—Finvest Asset Management, the fund of funds operation of Finvest Capital Markets LLC, allocated $10 million to the Nostradamus All Gold Fund IV, the most recent launch by gold trading veteran Irv Arenberg's Nostradamus Funds LLC.

The $10 million may be the first tranche of several from Finvest; up to $50 million may eventually be allocated to the All Gold Fund IV, contingent upon its performance, according to Mr. Arenberg. The fund, which launched Oct. 1, is a follow-on to the Nostradamus All Gold Fund III, now closed Previous HedgeWorld Story.

Currently the fund counts a mix of institutions and high-net-worth individuals in its investor base, but it is possible that will change in the future. For Mr. Arenberg, portfolio manager and founder of Nostradamus, the allocation is evidence of rising institutional interest in gold. "You'll see a noticeable pickup over the next several months," he said.

Mr. Arenberg cited the continuing weakness of the dollar as a major factor driving institutional hunger for gold, the current dollar rebound notwithstanding. "The dollar strength that we're seeing right now is a dead cat bounce," he said. "There is no significant fundamental reason it should [rise], but it's been down so much that technically it was due for a correction, and that's what we're seeing right now."

The Nostradamus All Gold Fund IV invests primarily in gold mining stocks and options, which make up approximately 85% of its portfolio. Ten percent is allocated toward silver stock and options, and the remainder is allocated toward similar investments in copper, platinum and palladium. According to Mr. Arenberg, the fund offers investors greater depth and diversity than can be found in exchange-traded funds, with the option for a more conservative risk profile than investors would get through futures. Nostradamus offers investors the ability to allocate across four separate internal strategies, ranging from aggressive to risk-averse.

Kalman Gabriel, who joined as risk manager of Nostradamus from Morgan Stanley around the time of the fund's launch last fall, said that the firm hedges its risk in other ways. Specifically, the fund is denominated in currencies other than the U.S. dollar, such as the Japanese yen, the Canadian dollar, the Australian dollar and the Swiss franc. On a weekly basis the firm evaluates its currency standing and will more heavily weight the stronger currencies. "We feel currency diversification helps us mitigate the currency risk inherent in many portfolios," Mr. Gabriel said.