Fri, 30/10/2009 - 08:21
Mick Swift, director of research at Dublin-based Abbey Capital, says the firm, which runs global macro and managed futures multi-manager funds with more than USD1.7bn under management, is enjoying strong allocations from investors thanks to the high levels of liquidity offered by the funds as well as the firm’s eight-year track record.
GFM: What is the background to your company and funds?
MS: Abbey Capital is an Irish-owned alternative investment manager. From its Dublin base, Abbey operates a number of multi-manager funds and allocates more than USD1.7bn across managed futures and foreign exchange markets.
Since its establishment in 2000, Abbey has built up one of the most successful track records in the industry and become a key player in the managed futures industry, with clients in Europe, the US and Asia.
Abbey Capital is registered as a commodity trading adviser and commodity pool operator with the Commodity Futures Trading Commission in the US and is a member of the National Futures Association. It is regulated by the Irish Financial Regulator.
GFM: Who are your key service providers?
MS: Our custodian is Bank of New York Mellon, and our clearing brokers are JP Morgan Securities, Newedge UK, Newedge US and Bank of America. Our registrar and transfer agent is Daiwa Fund Managers Ireland, the fund administrator is DPM Mellon, and our auditor is KPMG.
GFM: Have there been any recent events such as changes to the funds?
MS: Abbey’s multi-manager macro fund moved to weekly liquidity in July this year. The fund, which established a two-year track record in October, offers an eight-manager portfolio that now allocates to underlying managers exclusively via managed accounts.
Risk management, transparency and liquidity are central to Abbey’s approach. This was borne out in 2008 as the fund’s underlying managers met unprecedented volatility, and reacted quickly by lowering positions in the marketplace so as not to exceed the fund’s 6 per cent volatility target. The bidirectional nature of the strategy means that managers can capture moves in the marketplace whether positive or negative. At its core, global macro trading aims to exploit cyclical and fundamental movements in markets.
GFM: How and where do you distribute the funds? What is the profile of your client base?
MS: Our flagship fund, a multi-manger fund specialising in managed futures, is offered on the wealth management platforms of a number of major financial institutions. In addition, we have a small number of third-party distribution agreements in different markets. Investors in our funds include pension funds, foundations, endowments, private banks and family offices.
GFM: What is your investment process?
MS: Abbey’s core investment philosophy is to deliver investment products that generate real alpha through managed futures and foreign exchange investments in a multi-manager fund structure with meaningful risk overlay and ongoing manager due diligence.
GFM: How do you generate ideas for your funds?
MS: Our manager selection process involves analysis of the entire universe of managed futures, currency managers and global macro managers. The investment team is continually searching for new talent and opportunities within the industry.
Our seven-strong risk and research team in Dublin is constantly assessing the universe of managers in the marketplace. On a monthly basis, Abbey collects data directly from approximately 700 CTAs. We conduct ongoing quantitative and qualitative analysis on a range of managers to identify opportunities for our funds. In addition, the principals have extensive contacts in the industry and frequently attend conferences and invitation-only CTA presentations.
GFM: What is your approach to managing risk?
MS: Abbey has developed a risk management system operated within our proprietary risk and research process called Action. This is a tiered system incorporating both quantitative and qualitative risk measures to monitor and control exposure to the alternative managers. Probability distribution functions are used together with simulation techniques to derive realistic expectations both for returns and volatility and for the length and depth of drawdowns.
The use of managed accounts facilitates ongoing daily analysis by risk and research, as daily data is required from all managers. Daily risk reports detect movements away from the norm by the current managers in the portfolio. The daily liquidity provided on all futures contracts and the agreements executed with the managers facilitate the immediate termination of manager positions if required.
GFM: How has your recent performance compared with your expectations and track record?
MS: Our macro fund has performed well in 2009, delivering positive returns up to the end of July. Our multi-manager managed futures fund was negative for the year up to July in a more challenging environment for managed futures and foreign exchange.
GFM: What developments are you seeing in your sector?
MS: We continue to see a greater requirement for liquidity and transparency among investors. This has been a key feature of our business since inception. We have always worked to provide liquidity, transparency and risk management in our investment funds. Our flagship fund has offered daily liquidity since inception and the change for our macro fund will provide investors with a unique product that offers a multi-manager global macro approach with weekly liquidity.
GFM: Are investors’ expectations shifting between capital preservation and growth? If so, how do you deal with this?
MS: Investors are more conscious then ever of the need for a diversified portfolio of uncorrelated investments. Our philosophy is based on generating absolute returns through our funds over time.
We believe the inclusion of managed futures will help to deliver a diversified portfolio given the low correlation of managed futures to broader markets, the strategy’s bi-directional nature and its liquidity. Although we provide daily or weekly liquidity in our funds, we encourage our investors to invest on a medium- to long-term timeframe.
GFM: What differentiates you from other managers in your sector?
MS: Abbey has developed a specialist expertise in the managed futures and currency trading arena over a significant time. Three of our investment team have track records both as traders in managed futures markets and in building and managing teams of successful traders.
Our flagship fund allocates via segregated managed accounts, not only offering transparency of positions to investors but facilitating in-depth risk analysis on a daily basis.
Abbey has developed a risk management system operated within our proprietary risk and research process called Action. This is a tiered system incorporating both quantitative and qualitative risk measures to monitor and control exposure to the alternative managers. Probability distribution functions are used together with simulation techniques to derive realistic expectations both for returns and volatility and for the length and depth of drawdowns.
Our very sophisticated proprietary Action risk system facilitates ongoing quantitative analysis and risk management. It produces a range of daily risk reports that can track manager and portfolio performance and highlight deviations from historic track record, P&L volatility and the overall focus of individual manager’s investments.
Abbey allocates exclusively to managed futures, foreign exchange and global macro managers, our investment focus since the firm’s launch and the investment group’s core expertise. The principals have an established reputation as sophisticated investors in the managed futures industry.
The firm makes significant investments with underlying managers and is viewed as a long-term investor, and it has built an eight-year track record as a successful multi-manager using a consistent investment philosophy and process.
GFM: How do you view the environment for fundraising in 2009? How does this affect your funds?
MS: Initially we saw a challenging environment for fundraising in 2009, but this has improved significantly since the start of the second quarter, and we continue to see strong allocations to the sector as investors recognise the benefit of allocations to managed futures and foreign exchange in a diversified portfolio.
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