Baring Asset Management has unveiled plans to launch the Baring Alpha Currency Fund in October, subject to regulatory approval.
Baring Asset Management has unveiled plans to launch the Baring Alpha Currency Fund in October, subject to regulatory approval. The fundamental macro long/short strategy will target high absolute returns that uncorrelated to equities or bonds, offering investors an alternative source of alpha and diversification.
‘Investors have been increasing their allocations to high alpha currency funds recently as other historical sources of diversification have started to become correlated with mainstream asset classes,’ says Colin Harte, the new fund’s manager. ‘We expect this trend to continue as currencies become a preferred source of diversification to reduce portfolio risk and enhance returns.
‘There has been an increase in volatility in foreign exchange markets over the past year and during this period currencies have provided a source of alternative alpha. Volatility is being driven by monetary and fiscal policy mismatch and shocks to the world economy such as the recent energy and credit shocks. We believe volatility will remain high and currencies will remain a key source of alpha on a global scale.’
Harte has been running the alpha currency strategy for Barings on a segregated basis since 2006, delivering a strong 20-month track record and returning 20.77 per cent so far in 2008. The Baring Alpha Currency Fund will offer external investors access to the high alpha currency strategy for the first time.
‘The Baring Alpha Currency Fund is backed by an experienced team with a strong track record for managing global fixed income,’ says head of alternatives Paul Graham.
‘While many currency hedge funds are quant-driven, this fund uses a tried and tested fundamental macro approach, based on the purchasing power parity principle. This contrarian approach is lowly correlated with competing funds, and has delivered consistently positive performance.’
The fund will have an annual return objective of 12 per cent and will invest in a broad range of currencies in both developed and emerging markets. It will use variable levels of leverage, up to a maximum of six times the equity base. The annual management fee is 1.5 per cent and the performance fee is 20 per cent with a high water mark.
