Wealth Mgmt. Firm Preps Paired Trade ETF Strategy

May 8 2008 | 7:42am ET

San Francisco-based wealth management firm Main Management is prepping a paired-trading strategy that will invest in exchange-traded funds.

Co-founder and co-portfolio manager of the new fund Kim Arthur said the strategy, which is set to launch in the third quarter, aims to have a net-neutral exposure.

The strategy, which has been incubated since January, is shorting commodities such as gold but going long any of the countries that are producing the commodities, according to Arthur. He added that the strategy is also playing up to a dollar rebound trend, shorting global ETFs for telecoms and going long domestic U.S. plays for telecoms.

“We drill all the way down and get under the covers on sectors, so it’ll be sector pair trades, style pair trades and geographic pair trades,” he said. “The paired trade strategy relies on reversion-to-the-mean, too.”

And unlike existing ETF strategies in the market, Main Management’s paired trade strategy will charge a 1% management fee and a 10% incentive fee.

“Part of the idea with ETFs is that you don’t need a big research staff to be able to run your railroad, so you’re not out there doing individual work on securities, which are a lot more time consuming as opposed to research on sectors and asset classes,” he said.

The firm currently manages a long only equity sector rotation product, a global balanced product with option overlays, and an equity and fixed-income strategy. Its total assets under management are $250 million.

The new strategy will start trading with some $10 million in assets in the first year but it boasts a capacity of $100 million.

Arthur co-founded the firm in 2002 with Jim Concidine, Richard Fredricks and R. Stephen Doyle.


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