Tuesday, 29 July 2014
Last updated 1 hour ago
Oct 24 2011 | 12:57pm ET
Stonehenge Capital Management’s new commodity-focused hedge fund, the neutral-strategy Forward Curve Realignment fund, is off to a flat but solid start, returning 0.3% in its first month of trading during.
The new fund, which launched on Sept. 1, focuses on investing in a variety of sectors, including energies, grains, metals, softs and livestock.
Steven Michael, principal and portfolio manager of the fund, said: “According to the CFTC, as of July 29, 2011, there was in excess of $180 billion (notional) in net long index commodities positions across 21 markets. Also, we believe that there is more than $100 billion managed by CTAs, and an additional $100 billion in commodities Exchange Traded Funds. Much of this total investment is held in nearby or front-month contracts. As these contracts near their expiration, non-commercial investors must exit their positions in order to avoid taking or making delivery of the physical commodities. This results in massive flows of capital. Most often, these large flows of capital do not exit the market, but rather shift to new positions farther along the curve in order to maintain their overall (long or short) directional interests.”
According to Michael, FCR analyzes these capital flows, allocating investments across all of the markets, and balancing the positions across both long and short interests using calendar spreads.
“We employ a proprietary methodology that holds both long and short spread positions in each market in order to minimize exposure to underlying market moves,” said Michael. “We maintain positions at the front of the curve, never extending beyond the first year. Our model adjusts the relative long and short positions in order to minimize correlation to the underlying directional moves in each particular commodity.”
Delray Beach, Florida-based Stonehenge Asset Management is the sister company to SCM and manager of the Stonehenge Diversified 1 Fund.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…