Tuesday, 26 July 2016
Last updated 12 min ago
May 21 2008 | 2:00am ET
Two former Bridgewater Associates traders have founded their own hedge fund shop and are prepping a long/short beta neutral hedge fund for launch in the fall.
Kenneth St. Hill and Dawud Nelson set up Koshdan Capital Management in New York after leaving the $150 billion Westport, Conn.-based hedge fund. The pair started trading the Koshdan Beta Neutral Fund in February, returning 2.23% since inception, and is readying the hedge fund for launch sometime in the third quarter with about $20 million.
The Beta fund screens a universe of some 8,000 stocks for growth, earnings and other properties to identify long and short positions in the market that systematically produce consistent returns over a given holding period, according to fund documents. The fund’s portfolio is optimized weekly to ensure both long- and short-term trends in the overall market can be taken advantage of, while remaining relatively market-neutral.
The fund uses exchange-traded funds to offset market and sector risks and employs top-down analysis to its long and short books.
“That’s our niche and what makes us unique,” said Hill. “We’re actually trying to extrapolate portable alpha on the market and on the individual sector in an optimized way.”
Nelson added that the best way to envision the strategy is to “short the block while buying the house.”
The pair is currently bullish on the commodities sector, specifically agriculture and coal, and is shorting consumer discretionary products labeled as excess items that are crossed off the shopping list during weak economic periods such as gas guzzling sports utility vehicles.
Hill and Nelson, both African Americans, are marketing the fund as a minority-owned vehicle to the institutional crowd.
“A lot of pension funds have mandates to allocate to minority-owned firms so we’re trying to capture some of that,” said Hill.