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| Capricorn in the News | » Back | | | | -- FXG10 European Performance Award Nomination
The Capricorn FXG10 strategy has been nominated for the European Performance Award as 'Best Newcomer' for 2008.
LONDON, United Kingdom, March 06, 2009 (Hedge Funds Review) -- The Capricorn FX G10 fund’s strategy is categorised by Capricorn Investment Management as long-term, fundamental seeking alpha opportunities in most market conditions by benefiting from currency arbitrage and exchange rate discrepancies. The program seeks risk-adjusted returns that are uncorrelated to other investment strategies by trading the most liquid assets available to investors, the major currencies. The strategy uses currency forwards and has a directional bias in the carry trade, borrowing low-yielding and lending high-yielding currencies. Risk is controlled through a dynamic hedging strategy aimed at reducing exchange rate risk. Performance tends to be strong in all market conditions, providing ample liquidity is available.
Commenting on why the fund was first launched, Mikkel Thorup, chief investment officer at Capricorn Asset Management, says the company has been a foreign exchange manager for the last 10 years and was not going to stray into any other strategy. In early 2008 the company thought it wise to launch the strategy because of the diverse changes and inefficiencies in the currency markets at the time. “What we would take a different approach to the trading aspect of our other strategies that we run, which are technically orientated in analysis. This strategy, however, uses a fundamental analysis with a systematic approach to trading,” he says. “It is still foreign exchange trading but with a longer term view. We also checked that our clients would like the offering and it turned out that a small Swiss family office wanted to seed the fund, as they liked the strategy and approach,” comments Thorup.
In order to provide a source of uncorrelated alpha to professional investors, Capricorn believes their niche as a currency manager is the discipline inherent within its trading methodology. The routine for the strategy is initiated with the analysis of interest rate discrepancies, as well as the global macro fundamentals of the major currencies.
After the fundamental view is determined on the G10 crosses, leverage is re-balanced on a portfolio level depending upon the monthly cash adjustments within the fund. The individual currency crosses are then entered into the in-house carry model, used to optimise the allocations of the components within the portfolio. This builds a portfolio that is balanced in currency weighting, in order to reduce the exchange rate risk of the components and to isolate the carry benefits of the strategy. Execution is automated across multiple liquidity providers to access the arbitrage opportunities created by the risk control measures.
The recent foreign exchange environment has not been the best type of environment for this strategy because it has seen interest rates coming down. When this happens, carry trades do not get very exciting and there is not much interest rate arbitrage around. Nevertheless Thorup attributes the recent success of the fund to hedging off much of the fund’s exposure in long carry trades, and being able to time entries and exits efficiently.
“Through this we have been able to maintain constant performance. If we look at the first year track record, we have only have three down months. The main reason for our success I think is discipline. You definitely need discipline in trading and in decision making and we have 10 years of experience in discretionary and technical traders. Discipline and risk management are the key drivers of our achievement,” Thorup adds.
Thorup sees the fund performing in a similar fashion as the first year of live trading. In 2009 Capricorn is targeting returns of 15%-18%.
For further information please access our website at: http://www.capricornfx.com
| | Note to Journalists | |
Capricorn is an established currency manager with a global client base that includes; Banks, Asset Allocators, Institutions, Investment Funds and High Net Worth Individuals. As of today, the company has more than 50 years of experience within the investment advisory arena, currently advising over US$250 million in client assets. Since 1999 Capricorn has produced superior risk adjusted returns in its 'pure alpha' strategies managing approximately US$75 million, trading high liquid currencies as managed accounts and offshore funds for Individual and Institutional clients.
The vision behind Capricorn is to reach our capacity of US$ 500 million, managing the assets of professional investors. To achieve this goal our aim is to provide premium investment programs that seeks, strong returns with low volatility and a low correlation to other investment vehicles. In order to strengthen our ability to add value to our clients’ portfolio, we choose to develop and maintain relationships with reputable financial institutions that are leaders in their field.
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