Recent events in the world economy and in Western politics have led to an increase in global volatility. As countries threaten to default, currency strategies are scrutinised and monetary policies are no longer co-ordinated, a long/short trading strategy that focuses specifically on rates and foreign exchange has encountered great demand.
Citi Capital Advisors runs a global, USD14bn alternative asset platform focused on core competency and value-added approaches in the market strategies, private equity and infrastructure spaces.
CCA’s hedge fund business, known as Market Strategies, houses teams with expertise in credit, derivatives, rates, foreign exchange and structured assets. One of our important strengths has been the performance of funds in relation to risks taken. The CCA Market Strategies funds adhere to rigorous risk management tests both at the fund and platform levels.
Our clients, which are predominately institutional, have very high transparency standards. The result is robust risk management, partnership-like transparency and strong fund performance, which have been key contributors to winning this Hedgeweek award.
Some recent major market drivers have been concern about disruption due to fiscal imbalances in Greece and the contagion that could lead to problems in other countries such as Spain and Italy. At the same time certain US states such as California and New Jersey have been the subject of similar concerns.
With a weak global economy, the fact that China effectively increased rates took the markets by surprise and has raised issues about fragile economies being unable to cope with a slowdown in growth among large GDP countries. Central bank and government normalisation of fiscal and monetary policy is the most likely next development, and global asset markets will have to react.
These shifts in macroeconomic factors and policies create many opportunities. A strategy that permits going both long and short and allows for swift changes in trade allocations between products, regions and markets provides a good platform to benefit opportunistically from those shifts.
With increased regulation and political pressures continuing to change the alternatives landscape, CCA’s managers are already fully regulated by the US Securities and Exchange Commission or the Financial Services Authority in the UK. In addition, the ever-changing compliance environment makes the large scale of the CCA platform a major competitive advantage.
Citi Capital Advisors continues to focus on products where we believe we have an edge. In addition to market strategies, we also have large private equity and infrastructure businesses. Some areas to watch are the underserved middle markets space in general as well as certain long/short strategies that take advantage of global volatility.
Long/short funds should be considered by investors only where the platform has robust risk management – an area in which CCA has been hailed as outstanding – and a deep expertise in the strategy. Areas where we have that deep expertise include fixed-income markets such as emerging markets, global macro, municipals, mortgage credit and corporate credit as well as equity strategies that benefit from events such as mergers and acquisitions.
Lisa Anderson is a managing director and head of product management and marketing for the Americas and Michiel Jansen is director of CCA product management at Citi Capital Advisors