SAM fund targets capital preservation
Standard Asset Management has launched a hedge fund investing in both high yield and emerging market debt. The Strategic Bond Fund seeks to deliver absolute returns of 10 to 15 per cent. Volatility is to be kept at relatively low levels of around 6 to 8 per cent. The firm’s chief investment officer John Cleary said the fund would fit perfectly in the satellite-type, high alpha section of a private banking client’s portfolio, although the investment approach would emphasise capital preservation.
He said: “We do not buy distressed bonds and we don’t get emotionally attached to the bonds we do buy. If they start to go downhill, we cut our losses and get out before they default.” He claimed the company had never been invested in a bond at the time it defaulted.
The new fund holds assets of $40m (E31.6bn) after being created through the merger of two smaller products. Mr Cleary said he hoped to reach $200m in 12 months.
The fund is able to invest globally and go short, arbitrage and use derivatives. Fund positions are expected to include bonds in local currencies, global financials, long/shorts, corporate emerging market and a range of high yield instruments.
Securities will be selected based on positive cash flow, said Mr Cleary. “We are looking for ‘sleep at night stories’, creditors that look like they can service their debt.”
He added: “We do not believe in benchmarks and credit ratings for our asset classes. Ratings agencies are in the business of disagreeing with each other. Otherwise we would not need three of them.” He said that the agencies rate the people that pay them, raising questions concerning their independence.
The Strategic Bond Fund is domiciled in the Bahamas and shares are available in both euros and dollars.
Standard Asset Management is a London-based division of Standard Bank. It also has a base in Miami, where it was originally founded. The fund manager has $2bn under management and banks on its client list include American Express. The global high yield fund it runs for Amex on a white label basis delivered returns of 6.8 per cent in 2002 and 22 per cent the following year. Year to date the fund has produced 0.02 per cent.
The firm’s other products are an emerging markets funds, a high yield fund, a short term emerging market fund and three combined emerging market and high yield funds of varying durations.
