(Reuters) - UK-based Fulcrum Asset Management has launched a fund designed to tap the growing demand for active commodities strategies from investors unhappy with the returns from commodity index trackers.
Institutional investors have been switching to active strategies in greater numbers as passive plays have disappointed in volatile markets.
Fulcrum, which was founded in 2004 by two ex-Goldman Sachs executives and now manages over $1 billion (626 million pounds), has made the commodity part of its macro fund, Fulcrum Alpha, separately available in response to demand for strategies that will preserve capital during major sell offs.
"Investors want commodities as a core allocation for the long term with sensible risk management so they don't do poorly from the inevitable air pockets that can occur," Andrew Stevens, chief executive of Fulcrum, and a former investment manager at Goldman Sachs, said in an interview.
As well as a maximum drawdown constraint of 25 percent, which kicks in when markets become more volatile, there are limits on the amount of each commodity that can be owned. The aim is to control risk and outperform in down markets by getting out of positions quickly when prices plummet.
Returns are generated from systematic trading strategies based on prices, volatility, backwardation and contango, inventory data and mean reversion, investing across some 24 commodities.
Established in November as a UCITS III fund -- a European structure which also imposes certain concentration limits on managers -- the fund is being rolled out this quarter.
It is targeting an annual return of 15-20 percent with investors able to withdraw their money at a day's notice.
Stevens said the fund could reach several billion under management as it should appeal to a range of investors including asset allocators, private banks, pension funds, endowments, foundations and funds of funds.
Gavyn Davies, chairman of Fulcrum and a former chief economist of Goldman Sachs, said a similar strategy had run with real money since 2006 and was up the equivalent of 96 percent on a cumulative basis since inception.
Davies said the fund was currently market neutral, as the price and volatility signals are mildly positive but signals related to inventory levels are negative. "The other models are giving us long positions in some of the industrial metals and short positions in energy," he said.
Fulcrum has also just opened a New York office headed by Tom Dempsey, who spent time at Goldman Sachs Asset Management as head of product strategy for the U.S. quantitative equity group.
"He will add to the investment process, and build the business in North America," said Stevens, adding that he hoped to have two or three people in the office by summer.
NEWS - Commodites, Agriculture, Green Investment - NEWS
1/21/2011
Taurus Quits Silver After Metal Rallies `Too Much,' Maintains Bet on Gold
By Chanyaporn Chanjaroen - Jan 21, 2011 Taurus Funds Management Pty sold all of the silver holdings in its $200 million precious-metals fund this month, saying the metal’s rally has been excessive, while sticking with a larger bet on gold, according to an executive.
“We’ve cut all silver exposure, in physical and equity, simply because it went up too much in too short a period,” Co- Manager Brenton Saunders said in an interview today. Taurus Precious Metals Strategy sold the 5.7 percent holding, and cut a further 1.9 percent in silver-mining shares, he said. Cash holdings surged to 8 percent from 1.4 percent last month.
Silver gained 83 percent last year as investors bought precious metals for protection against a weaker dollar and Europe’s financial crisis. This year, spot silver has lost about 11.5 percent as holdings in exchange-traded products have fallen amid speculation the gains were overdone. Silver is this year’s worst performer in the Thomson Reuters/Jefferies CRB Index.
“The correction is pretty healthy, we don’t think it’s a major inflection point,” said Saunders, who co-manages the Sydney-based fund with Mohendra Moodley. Taurus Precious Metals Strategy returned almost 32 percent last year from February, when it started. Silver is “digesting the big moves,” he said.
Immediate-delivery silver traded at $27.3625 an ounce at 2:55 p.m. in Singapore after peaking at $31.2375 on Jan. 3, the highest level in 30 years. Holdings in four exchange-traded funds tracked by Bloomberg News have dropped 2.6 percent to 14,772 metric tons from a record high set last month.
‘Crowded’ Trade
Silver may retreat as much as 20 percent this year as soaring demand for physical metal signals a “crowded” trade, Barry James, chief executive officer of James Investment Research Inc., has said. James oversees $2.4 billion.
Spot silver’s slump this year has eclipsed a decline in immediate-delivery gold, which traded today at $1,347.30 an ounce, down about 5.2 percent in 2011. Platinum and palladium have gained this year.
Taurus has maintained its physical gold holdings at 77 percent of the fund, Saunders said, citing low borrowing costs and continued investment interest. “We expect it to do well,” Saunders said. “Any reduction that we or other investors made in gold should be short-lived.”
Saunders and Moodley also manage the Taurus Global Resources Hedge Fund, which returned about 2 percent last year since it was started in February. In all, Taurus Funds Management oversees $650 million.
“We’ve cut all silver exposure, in physical and equity, simply because it went up too much in too short a period,” Co- Manager Brenton Saunders said in an interview today. Taurus Precious Metals Strategy sold the 5.7 percent holding, and cut a further 1.9 percent in silver-mining shares, he said. Cash holdings surged to 8 percent from 1.4 percent last month.
Silver gained 83 percent last year as investors bought precious metals for protection against a weaker dollar and Europe’s financial crisis. This year, spot silver has lost about 11.5 percent as holdings in exchange-traded products have fallen amid speculation the gains were overdone. Silver is this year’s worst performer in the Thomson Reuters/Jefferies CRB Index.
“The correction is pretty healthy, we don’t think it’s a major inflection point,” said Saunders, who co-manages the Sydney-based fund with Mohendra Moodley. Taurus Precious Metals Strategy returned almost 32 percent last year from February, when it started. Silver is “digesting the big moves,” he said.
Immediate-delivery silver traded at $27.3625 an ounce at 2:55 p.m. in Singapore after peaking at $31.2375 on Jan. 3, the highest level in 30 years. Holdings in four exchange-traded funds tracked by Bloomberg News have dropped 2.6 percent to 14,772 metric tons from a record high set last month.
‘Crowded’ Trade
Silver may retreat as much as 20 percent this year as soaring demand for physical metal signals a “crowded” trade, Barry James, chief executive officer of James Investment Research Inc., has said. James oversees $2.4 billion.
Spot silver’s slump this year has eclipsed a decline in immediate-delivery gold, which traded today at $1,347.30 an ounce, down about 5.2 percent in 2011. Platinum and palladium have gained this year.
Taurus has maintained its physical gold holdings at 77 percent of the fund, Saunders said, citing low borrowing costs and continued investment interest. “We expect it to do well,” Saunders said. “Any reduction that we or other investors made in gold should be short-lived.”
Saunders and Moodley also manage the Taurus Global Resources Hedge Fund, which returned about 2 percent last year since it was started in February. In all, Taurus Funds Management oversees $650 million.
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