Gemini Rushes Into Gold With First Hedge Funds

Oct 18 2007 | 4:00pm ET

Gemini Futures in August began trading its first two hedge fund strategies, looking to capture profits from gold deposits, which was previously only accessible to industry insiders such as metals mining companies, manufacturers and bullion dealers, according to the firm.

The Gemini Long/Short Gold Fund follows a three-pronged strategy: It holds a conservative fixed-income allocation, primarily in investment-grade Treasury bonds, invests to receive the Gold Forward Offered Rate, the income that is generated from the interest paid on gold deposits that back gold forward contracts, and takes levered long positions, using gold futures, to take advantage of the rising price of gold in an uptrend.

The Gemini Total Return Gold Fund’s strategy is similar to the Long/Short Gold Fund except that it does not use leverage in its long gold futures positions. Instead, the fund’s long positions are used only to hedge any short gold exposure in the portfolio.

“Gold plays a major role in how we look to generate returns,” said Dan Ascani, portfolio manager. “The structural efficiencies that are a natural function of the gold market have historically generated long term cash flow streams. Because of the structure of Gemini’s funds, we can seek to virtually double those cash flow streams, while at the same time looking to capture opportunities to generate capital gains in both rising and falling markets.”

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