Traditional and alternative asset manager EquityStar Capital Management is planning a 1 June, 2010 launch for its new hedge fund, EquityStar Global Partners. The fund is unique in that it will invest some of the firm’s profits into the economies of African Nations, wherever needed most.
EquityStar’s equity long/short strategy will aim for returns of 25-35% while attempting to keep volatility between 7-10%. The market neutral strategy will attempt to hedge most of the general market risk and volatility (including ones similar to the wild swings as of late) out of the portfolio. The new fund expects to raise USD50 million by September 2010, with a target of USD100 million or more by year end. Capacity of the fund is expected at USD1.5bn
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Some of the much sought after features of EquityStar include independent tier 1 service providers, transparency, weekly and sometimes daily liquidity, no lockups, oversight by an outside risk manager, and a financially strong custodian to protect the assets. The fund’s independent administrator manages USD130 billion in funds and grants trading only access to the investor funds. This is especially beneficial in today’s climate.
EquityStar Capital Management is a socially responsible, multi-strategy investment and wealth advisory firm created to provide traditional and alternative asset management exclusively for institutional investors, retirement plan sponsors and certain qualified individuals. The fund will trade in the universe of the 1500 most liquid global companies and is open to new investors. By reinvesting some of the firm’s profits into African economies, EquityStar will help give citizens of Emerging Nations the confidence to reinvest in their own economy by helping to open up their markets to free trade and encouraging Foreign Capital.
EquityStar was formed as a Master Feeder structure to accommodate US, non-US and US tax exempt investors. Steven Zoernack is the managing partner and chief investment officer of EquityStar and serves as portfolio manager for the fund.
The new fund will utilize sophisticated quantitative systems using technology such as neural networks to optimize its investment selections and to attempt to produce a higher Sharpe Ratio, or risk-adjusted rate of return. Using a blend of fundamental and technical analysis, EquityStar will seek to generate positive absolute returns in rising, falling and volatile, range-bound markets.
"The 2008-2009 market deleveraging left many pricing dislocations within the capital structure," says Zoernack. "As a result there are multiple opportunities to capitalize on mispriced assets. Much of the global equity, debt, currency and commodity markets still retain valuable relative value and unique opportunities."
Zoernack has 25 years experience in the investment and finance community and was formerly with Bear Stearns and Sun Credit. He advised a niche group of wealthy clients representing several hundred million dollars in investment assets spanning equities, commodities, and alternative investments.
“We buy companies with good bottom up fundamentals and sell closely related companies that are overvalued in relation to the companies we buy while minimizing correlation to the overall markets," says Zoernack. "A recent example of this strategy would have been to purchase equally dollar weighted shares of Visa (V) and sell equally dollar weighted shares of MasterCard (MA), i.e. purchase 3,000,000 shares of Visa for every 1,000,000 shares of MasterCard sold short. The trade would have been successful whether the overall stock market went up or down because of the correctly predicted declining relative difference in value between the two investments.”
Deriving returns from the performance differential within the pair, this approach seeks to achieve consistency of return by earning small, steady profits on many positions, rather than trying for large gains that may end up being equally big losses.
Zoernack believes that balanced long/short equity trading – combined with good stock-picking ability – can provide consistently good performance in any market and even excel in a market decline. In today’s investment climate, he feels this can be a very attractive feature to investors.
