Sanctum FI LLP will be launching the Sanctum Fixed Income Fund on 15 September 2003.
The new relative value fund will invest mainly in G10 Governments (and associated derivatives) and will be managed by Antony Mayhew, former CIO of Bipielle Int (UK) Ltd. The Sanctum fund is expected to launch with between $25-$50m.
Whilst at Bipielle Mayhew ran the Adamas A fund with similar investment and risk constraints to Sanctum. The fund gave an average annual return (after fees) of 13.3% with a 5.3% volatility and a maximum drawdown of 3.0%.
In a statement, Sanctum said: "As has been evident recently, the majority of relative value strategies have a directional bias, hence a macro overlay view is critical in ascertaining the viability of the strategy, as well as managing the position once initiated. In order to reduce downside risk, we will sometimes hedge the directionality of relative value trades with option strategies as well as opposing outright directional positions".
"Long term repos will also be used to reduce the risk of squeezes. This we see as our "edge". An understanding of the directional bias of the markets, significantly improves our ability to evaluate the sustainability of anomalies".
"We look for relative pricing anomalies driven by qualitative factors such as differences in risk appetite, liquidity demand, and tax efficiency amongst market players, as well as changes in issuance patterns and extreme-volatility environments".
"We also use quantitative properties like mean-reversion, mean-reversion speed against carry, etc. in constructing measures of richness/cheapness. A number of opportunities occur on a relatively predictable basis such as changes in delivery months, changes in cheapest-to-deliver, as well as over "auction" periods".
The new Fund will use Barclays Capital as prime broker and GlobeOp Financial Services as Administrator.