The Interview - Simon Luhr, PCE Investor, and Mahmood Noorani, Gyldmark: “There will be exceptional opportunities in the months ahead to capture large market moves”
Simon Luhr, chief executive of PCE Investors (pictured), and Gyldmark chief investment officer Mahmood Noorani, explain the approach of the Gyldmark global macro fund launched in July and that is currently targeting the overall level of demand and supply for risky assets.
GFM: What is the background to your company and fund?
SL/MN: PCE Investors launched Gyldmark, a global macro fund, on July 13. An experienced team of individuals with a proven track record of delivering uncorrelated returns comprising Mahmood as chief investment officer, portfolio manager Alastair Hollingdale and strategist George Hatjoullis provide an in-depth macroeconomic and policy understanding drawn from their successful history of building and managing trading businesses.
GFM: Have there been any recent key events such as changes to the management team?
SL/MN: SW1 Capital now owns the majority stake in PCE Investors and Simon, Neill Ebers and Terry Duffy are all managing partners. Simon is chief executive and Neill is a director.
GFM: What is the profile of your current and targeted client base?
SL/MN: Like the rest of the industry, the institutional client base is growing and PCE Investors’ positioning with a versatile operations platform and a highly scalable infrastructure is appealing to institutional investors.
GFM: What is your investment process?
SL/MN: The investment process integrates three factors in order to identify investment opportunities, macro‐economic fundamentals, market themes and technical conditions. Macro‐economic fundamentals cover business cycle dynamics, structural economic, social and technological shifts, the impact of government monetary, fiscal and regulatory policy, and geopolitics.
In pursuing market themes, we distil market commentary, research and professional press, analyse investor perceptions and flows, and identify key market drivers. Under the heading of technical conditions, we monitor price action, momentum and emerging trends, gather available investor positioning and sentiment data, and set stop loss and target levels.
We identify asset class that is most directly impacted by the view and conduct relative value analysis to optimise the instrument chosen. We find the best risk/reward trade and most asymmetric pay-off profile, and select between an outright position or option strategy. In terms of risk allocation, we look at the selected trade within the context of the overall portfolio and examine whether the trade diversifies overall portfolio risk or concentrates risk further. The stop-loss level and risk allocation determine the optimal position size.
GFM: What is your approach to managing risk?
SL/MN: The entire portfolio has a stop-loss level or circuit breaker. If the fund is showing a 10 per cent decline for the year to date, all positions will be liquidated. Investment activity will cease for a month during which time investors can decide whether they want to redeem, invest more or do nothing. Investment activities will then resume. Down 10 per cent is a sort of ‘time out’ event.
GFM: What opportunities are you looking at right now?
SL/MN: Gyldmark identifies one major macro theme, the overall level of demand and supply for risky assets. Equities, bonds, commodities and currencies are highly correlated at the moment. Market volatility is high and there will be some exceptional opportunities in the months ahead to capture some large market moves.
GFM: What events do you expect to see in your sector in the year ahead?
SL/MN: We expect equity markets to move sharply lower in the autumn. The economic down cycle we are in has much longer to run. We also expect bond markets to perform well over the remainder of the year. Our investment approach has no directional bias, but the volatility should provide a positive environment for our macro strategy.
GFM: Are investors’ expectations shifting between capital preservation and growth? If so, how do you deal with this?
SL/MN: There is a much greater focus on liquidity and security of capital. Gyldmark invests only in highly liquid financial instruments, and has taken various measures to protect the capital invested.
GFM: What differentiates you from other managers in your sector?
SL/MN: We deliver a pure macro strategy, outstanding pedigree and experience, and very high liquidity, as well as independent oversight from PCE Investors.
GFM: How is the environment for fundraising in 2009? How does this affect your funds?
SL/MN: We believe investors will gradually return to the alternative investment space over the balance of 2009, and that macro strategies will be among those most sought after. Funds that have the highest degree of transparency and liquidity together with top quality managers and infrastructure will be in greatest demand. Our fund is well positioned and will be an attractive proposition for investors.
GFM: Do you have any plans for other product launches in the near future?
SL/MN: PCE Investors has a number of new launches in the pipeline this year.
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