Gerald Holtham, former CIO of Morley Fund Management and a well-known economist and investment strategist, has formed a hedge fund business.
Cadwyn Global, a macro fund launched in the Cayman Islands this week, will be the first fund sponsored by the new company. The fund is a joint venture between the company founded by Holtham, Cadwyn Capital LLP, and PCE Investors Limited, a subsidiary of the Schneider group.
The fund has the backing of a number of cornerstone investors, including Fleming Family and Partners and the Carlyle Trust, parent company of the Julian Hodge bank, who have both backed the fund with capital committed for two years subject to performance criteria. This is the first time that either organisation has backed a start-up hedge fund in this way.
Holtham has spent nearly a year since leaving Morley testing the process that will be used on the fund. He said: "This is a development of the tactical asset allocation process that I started and led at Morley, which was consistently successful over five years."
"But we have developed new quantitative screens to assess relative value in global equity and bond markets and have adapted risk management and trading procedures to the different circumstances of a hedge fund."
"The model portfolio on which we conducted the trial and experiments returned just over 16 per cent gross in eleven months with volatility of less than five per cent, so I am confident this bird will fly," he said.
Holtham and colleague Chetan Mehra, a former fund manager at Laing and Cruikshank, will run the fund under the PCE umbrella from their offices in the City, with research provided from a Cadwyn Capital office in Cardiff.
Holtham said: "We have an excellent young researcher there at present and will look to build up as funds under management increase. We have state-of-the-art wireless communications so there's no trouble keeping in touch and, appropriately enough 'Cadwyn' means link in Welsh."
"Meanwhile the arrangement means we have the industrial-strength systems and organisational and compliance infrastructure of PCE behind us. We did not have to reinvent the wheel or create a middle-office from scratch. Moreover we have plugged into the existing PCE relationships with prime broker Morgan Stanley and administrator PFPC in Dublin."
Steve Williams, formerly a Managing Director of Cantor Fitzgerald's broker-dealer operation in London, and more recently an entrepreneur in data management software, will oversee the business and marketing of the fund.
PCE Investors Limited is authorised and regulated by the Financial Services Authority.