Julius Baer has opened its third single manager hedge fund, the Julius Baer Credit and Emerging Markets hedge fund (JB CrEM fund), to public subscription.
The fund, which has returned 8.21 per cent net since inception on 1 November, 2004 in the USD class, seeks net absolute returns of LIBOR +10 per cent per annum using a maximum volatility of 9 per cent and aims to have a low correlation to equity and bond markets. It utilises mainly investment grade instruments in the corporate credit sector, as well as bond & FX strategies in emerging markets.
The JB CrEM fund is a carve-out of these strategies from the Julius Baer Diversified Fixed Income Hedge Fund and was launched with USD 120m of assets from that fund invested in Class X (no management or performance fee) shares. The CrEM investment team is Paul McNamara and Darren Reece who, as well as leveraging their own extensive portfolio management skills, are able to draw on the expertise of the global bond team in London and other Julius Baer resources globally to create their strategies.
The fund has now been opened to public subscriptions, share classes are denominated in USD/EUR/GBP/CHF/YEN and the minimum subscription is USD 500,000 (or equivalent in other currency). Management fees are 1.75 per cent per annum and performance fees are 20 per cent of net realized and unrealized appreciation in NAV per annum in excess of the Hurdle Rate which is the 3 month Libor rate for the currency of each share class.
The Prime Broker is Lehman Brothers, the Administrator is International Fund Services Ltd and the share classes of the fund are listed on the Irish Stock Exchange.
"The past few years have seen important structural changes in both emerging and credit markets," says Tim Haywood, CIO of JBIL. "Many emerging bond markets are becoming more mature whilst at the same time there has been rapid development of the credit derivatives market. This fund combines these two asset classes to take advantage of valuation anomalies in the fixed income and associated currency markets using some of the latest techniques. The focus on a blend of higher grade credit and local emerging markets is unique, I believe, and the initial results are most encouraging.'
Diversified portfolio of credit and emerging market strategies
Principally relative value with a small directional element
Portfolios are built after rigorous fundamental analysis of global economies using a combination of 'top down' (mainly for emerging markets) and 'bottom up' (mostly for credit) styles
Extensive use of both local and hard currency emerging market debt instruments
Neutral position by gross assets: 70 per cent corporate sector; 30 per cent EM sector
Neutral position by VaR: 50 per cent corporate sector; 50 per cent EM markets sector
Monthly VaR limited to 9 per cent (97.5 per cent confidence level, one month of trading days)
Maximum permitted FX VaR is 4 per cent
Leverage limited to 6 times fund equity both long and short (on a US 10 year Treasury equivalent, delta adjusted basis, where appropriate)
FX leverage limited to 4 times fund equity (on a delta adjusted basis, where appropriate)
Maximum of 20 per cent of gross assets can be exposed to any one counterparty (except the prime broker)
Maximum of 20 per cent of gross assets can be held in any one issuer
Maximum equity and equity-related derivatives exposure of 5 per cent of NAV.