Fund Spotlight: March 2017

Welcome to the March edition of the Apex Capital Introduction Services Fund Spotlight delivering the latest market information including statistics around fund launches, top fund performers and information on live opportunities.

New Funds Spotlight

There often appear to numerous amazing FX strategy stories circulating round the hedge fund industry; with an abundance of prop accounts and back-tested algorithms offering the prospect of lofty returns to their investors. As the investment industry has learnt (often to its peril over the years) these punchy FX return figures often do not stand the test of time. Perhaps a more process driven, yet dynamic approach to trading currencies is required.

As a Cap Intro team we are obligated to look at the funds and managers we work with from an investor’s perspective and it can sometimes be fairly tricky to find managers in the FX space that allocators are excited to put their weight behind. Having said that, there is an FX fund that gives us great confidence; this fund’s strategy blends discretionary and systematic trading on spot G7 FX markets. Boasting an extremely strong and consistent prop track record, the fund structure launched last year amongst considerable interest from early stage investors and in turn achieved excellent returns. The blend of systematic and discretionary trading with low leverage means that they are able to tightly control risk on the systematic front whilst the management team utilize behavioral methods to monitor and control risk among the discretionary trading strategies. The result is a fund that leverages volatility in the FX markets to produce an absolute return profile. They minimize downside risk and maximize upside profit in order to generate uncorrelated asymmetric returns.

Illiquid Opportunities

The structured credit market has been somewhat vilified in both the retail investor and general public space with many mainstream media outlets damning it as a major cause of the 2008 crisis. Yet, having said that, many parts of this market weathered the storm incredibly well and continue to chart a solid course and the opportunity in structured credit remains strong. Despite containing higher yields relative to vanilla credit, Historical default rates have been much lower than those in the corporate credit sector for similarly rated tranches and this gives exposure to diverse underlying credits. The reduced competition and efficiency in this space allows for trading gains and the engineering of events that subsequently generate alpha. What matters in the structured credit market is experience, experience not only to identify opportunities but also to properly understand the risks associated with this complex asset class. We are proud to be working with a manager in this market who has been rated independently as one of the best managers in Europe. Click below for more information.

Investor Appetite & Industry Trends

Brexit has dominated the news since the UK voted to leave the European Union 9 months ago; it now becomes more prevalent than ever as Teresa May triggers article 50 and the formal Brexit process begins. Some argue that the UK economy is growing despite these historic changes and there has been no market implosion, whilst simultaneously others argue that UK assets have drastically underperformed the rest of the world. With the pound falling below the 50-day moving average on Wednesday morning, then climbing back up, we must wonder whether this is a sign of what is to come. Moving averages are commonly followed measures of momentum used by investors to track price trends over various durations. When market prices rise or fall some see it as a signifier accelerating the current trend, while other investors remain unconvinced that it dictates market direction.

The direct impact of Brexit on the world economy is likely to be modest, it is still expected to impact investor confidence at a time when the global recovery remains fragile. Regardless of the how situation plays out, Brexit related uncertainties will take some time to dispel and in these conditions it will be more important than ever to remain flexible from an investment perspective.

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