Portfolio protection solutions strong performance
Wednesday 12th November 2008
Customized portfolio protection solutions yield
strong performance in
Pure Capital Limited
(Pure Capital), a Wellington-based,
quantitatively-driven investment manager specializing in "targeted
non-correlation" saw strong performance from their "Pure Bespoke"
customized portfolio solutions in October - with client account
performance ranging from +4% to +10% for the month.
Pure Capital describe their
"targeted non-correlation" approach as "the
provision of positive investment return streams that are very low or
negatively-correlated with specific geographic or asset class
Pure Capital's year-to-date
average performance across all products was
+26% at month-end October 2008. Medium term correlation coefficients
ranged from -0.15 to -0.80.
Limbrick, Pure Capital's Chief Investment Officer, "We
a range of quantitative techniques through which we both deconstruct and
analyze portfolio performance. Once portfolio performance drivers have
been specified, customized portfolio solutions are built using a series
of proprietary building blocks, each of which is designed to address
specific types of pay-offs".
September the Paris-based EDHEC Risk and Asset Management
Centre published a report on overlay hedging in fund of funds. The
report, authored by David E. Kuenzi, Remy Chaudhuri and Zhihui Dong of
Glenwood Capital investments concluded that "a hedging capability
removes a significant constraint from FoFs" and "should have the net
result of improving alpha, allowing for more unique and idiosyncratic
portfolios, and for more creative structured products".
Limbrick highlighted the benefits to
a European fund of fund of
implementing a Pure Bespoke solution - "if one were to use the
Eurekahedge European fund of funds index as a fund of fund proxy, our
Pure European BetaMatch program could have reduced fund of fund losses
from almost 19% year-to-date to less than 1%. Not only would performance
have been improved, but there would have also been more cash available
for redemption needs. We also give our clients the choice of upside beta
exposure if they require it".
In response to a
question regarding the type of client exposures hedged
by the Pure Capital, Limbrick said the Pure Bespoke portfolio solutions
typically address "pervasive equity beta exposures or potential gap risk
issues but we do look forward to widening the approach to address a
range of more exotic or dynamic exposures".