Chris Clarke outlines the investment process of the Westferry Global Markets Fund, which opened to third-party accredited investors in September 2006.
HW: What is the background to your fund?
CC: Westferry Global Markets Fund is managed by Westferry Capital Partners LLP. Investment advisor is KTH Fund Management LLP, which is a member of the Kyte Group LTD Group of companies.
The fund was seeded and launched on 3 April 2006 with KTH seed money and partner money and has been opened to 3rd party accredited investors in September 2006.
There are three partners : Christopher J Clarke, CEO and Managing Partner; Hans Summers, Senior Partner and Head of Business Development; Keith J Clarke, Partner and COO
HW: Who are your service providers?
CC: Prime Brokers - Fimat and the Kyte Group Ltd; Accountants and Auditors - BDO Stoy Hayward; Legal Counsel - Ogier.
HW: How and where do you distribute the funds? What is the profile of your current and targeted client base?
CC: We target third party accredited investors including FOF, Family Offices, High Net Worth Accredited Individuals and Institutional Investors.
HW: What is the investment process of your funds?
CC: Longer Term Systematic Trend Following in approximately 40 transparent, uncorrelated and highly liquid Futures Markets. The fund is wholly focused on risk and money management.
HW: How do you generate ideas for your funds?
CC: The system was designed to seek out possible price trends and provide signals to enter these trends - hence ideas are systematically generated.
HW: What is your approach to managing risk?
CC: Our approach to managing risk has 2 main levels:
- The system itself is based on rigorous risk and money management parameters that include risking a small percentage of capital per trade, trading smaller in drawdowns and seeking to avoid large correlation within the portfolio. The portfolio is balanced and to the best intent displays lowest possible correlatory factors. The markets traded are highly transparent exchange listed liquid markets and the system has been back tested over 20 - 50 years of market behavior and traded live for 2.5 years.
- On an operational level there is total and meticulous attention to detail to avoid human error. Full back up procedures are in place for system / technology problems. The fund itself is not hugely technology intensive but back up is in place on many levels. The fund tries to run a tight and smaller ship to avoid the pitfalls of exposure to staff errors and the chain of events from signal generation to trade execution and reconciliation to ensure the process is as tight as possible. We also have a dual level of risk management provided by the KTH Fund Management Team and the Kyte Group Ltd so all investors and potential investors know they have a dual level of due diligence in place.
HW: Has your performance been as per budget and expectations? Do you expect your performance or style to change going forward?
CC: The system has run exactly as anticipated and performance has been within expectations given market conditions. All returns and risk adjusted return statistics lie exactly within the parameters of the system and the fund. We do not expect our performance or style will change going forward
HW: What events do you expect to see in your sector in the year ahead?
CC: Plenty of market price trends as world economic/political and geo-political events dominate global markets with continued uncertainty and new landscapes developing we expect markets to trend and display volatility all of which are good for our business model.
HW: What differentiates you from other managers in your sector?
CC: We strongly believe that a large proportion of the financial community is thoroughly mistaken by seeking material differences between managers if the manager's investment style is robust and based on many decades of success. We believe in particular that in the trend follow following universe there is no need to greatly differentiate yourself from hugely successful managers and that additional investment vehicles opening up to investors, within the trend following community, will have no impact on market returns, in particular degradation of returns, as markets will always trend. The managers who stick to their beliefs and have the tolerance to weather drawdowns and return volatility will continue to profit against those vehicles who are trying to satisfy investor demands for sub 10 % returns with little volatility. A huge barrier to entry is placed in the world of long term trend following by the fact that in order to be successful you need to tolerate draw downs and volatility and not pander to potential investor requirements of the opposite - therefore those new trend followers who enter the arena and stick to their guns will find success forthcoming and not many will be able to stick to their guns because trend following is hard to stick with and often overlooked by investors, despite its 20 year (plus) track record of out performance in the investment universe. Our sole aim is to stick rigidly to what we know makes money with absolute discipline and not to change our strategy simply to attract more investors.
In any business model there are those who believe the only way to bring success is to invent something new or seek out a new holy grail strategy whereas there are those successful businesses that understand that this is not necessary for success - what you need is to run a business properly and if the business is based on a previously successful model and customers (potential investors) understand that model then success will be forthcoming.
The only two things that perhaps set us apart from other managers are that we have such belief in delivering returns that we only charge a 0.5 % management fee preferring to take our remuneration on performance fees (25 %). 95 % of my personal assets are in the fund and my interests are aligned with our customers' interests, I believe we will deliver results and hence I'll take remuneration on performance not simply for managing investor money.
HW: Do you have any plans for similar/other product launches in the near future?
(Chris Clarke was interviewed on 18 September 2006)