Michael Wexler's Maple Leaf Capital is preparing to launch the Macro Volatility Fund to external investors on 1 November 2004.
Wexler, CIO of the 2-year old firm said: "Significant supply and demand imbalances continuously appear in derivative markets because the principal users of options (pension funds, corporates, mutual funds, insurance companies, retail and hedge funds) express a view on the direction of the underlying asset, not the volatility of that asset. As a result, they make non-economic volatility decisions which create opportunities for our strategy."
Maple Leaf stated that the strategy, +18% at Sept 2004 with a Sharpe Ratio of 2.1 since starting with internal capital on January 1, 2004, treats implied volatility as an asset class within and across four markets (equity, fixed income, currency, and commodity) with a dual approach to trades from a volatility and macro perspective.
Wexler said: "Maple Leaf Capital aims to be the premier hedge fund in volatility trading with expertise in modelling, executing and managing risk in derivative markets based on four fundamental principles:
1. Dynamic allocation of capital between asset classes.
2. Diversification of returns due to involvement in different asset classes and strategies.
3. Double Alpha approach of screening every trade through a macro and a volatility filter.
4. Transfer of derivative knowledge across markets in order to turn synergies into profits".
Philippe Teilhard de Chardin, Managing Director of Fimat Alternative Investment Solutions in London, the fund's prime broker, noted: "We are interested in the strategy shift occurring within the volatility space as increasing numbers of managers are focusing on absolute returns through relative value or outright (long or short) volatility trading, thus complementing traditional long only volatility profiles."