Cambridge Preps Asian Currency Hedge Fund

Nov 29 2007 | 7:59am ET

Asset management firm The Cambridge Strategy is prepping a currency hedge fund derived from its Asian Emerging Markets Alpha Strategy. The U.K.-based firm is planning to launch the fund on Dec. 15 with $10 million in seed capital. 

The fund will invest in all major Asian currencies and avoid illiquid currencies in countries such as Vietnam and Cambodia. Russell Thompson, the firm’s CIO, is the portfolio manager for the new offering, and Encinitas, Calif.-based Ten Asset Management is marketing the fund in the U.S.

The 19-month old strategy is managing some $30 million in separate accounts and has returned 24.33% year to date. Chairman Edward Baker, who until April was the CIO of emerging markets growth equities at AllianceBernstein, said investor demand for the strategy in a fund structure as well as regional interest prompted the launch.

“From a fundamental point of view, it’s still a growing area attracting huge investor interest,” he said, adding that the overall currency markets are inefficient and there is an opportunity to make money through active management.

“These inefficiencies are fairly short term so one has to have that kind of focus and one needs to be very systematic about this. We have an algorithmic approach for identifying signals, which has worked well for us.”

Baker noted that the fund employs both technical and fundamental strategies to the currency markets, allowing it to increase capital to each strategy as dictated by the market. The fund did this in September when it gained 8.25%.

“What we found is that in periods of rising and high volatility, we need to take money out of the fundamental strategy into the technical strategy, which performs best in a higher volatility environment, and September was just the case. We did especially well shorting the dollar and [going] long Malaysian ringgit that month.” 

The Asian Currency fund charges a 2% management fee and a 20% performance fee with a $250,000 minimum investment requirement.

Cambridge also manages the Developed Markets Alpha and Extended Markets Alpha strategies in managed accounts. All told, the firm manages $150 million across its currency strategies.

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