Magnum Targets Treasury Arb. Fund

May 15 2008 | 11:44am ET

Emerging hedge fund investor Magnum Global Investments has brought another manager into its fold. The firm has committed capital to the Yield Curve Opportunity Fund, an arbitrage strategy dubbed.

The fund, managed Peter Powers, a registered floor broker on the Chicago Board of Trade and a former vice-president in institutional fixed income at Dean Witter, focuses on discrepancies occurring along the U.S. Treasury yield curve, Hedgeweek reports.

YCOF invests in the Treasury futures market employing CBOT contracts and a proprietary model to identify discrepancies in the yield curve, comparing values of Treasury instruments of differing maturities to determine whether any particular instrument is comparatively undervalued or overvalued against others along the yield curve. Its arbitrage strategy includes the simultaneous sale and purchase of Treasury futures contracts, creating a spread among commonly traded Treasury notes and bonds.

According to Powers, the fund’s spread positions are utilized to arbitrage temporary yield curve discrepancies.

In its 32-month history, the fund has returned a monthly average of 3.06%, and has suffered only one monthly drawdown, of 3.68%.

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