Monarch Capital, a Charlotte, N.C.-based foreign exchange trading firm, is gearing up to launch its first hedge fund later this year. Clarkson Jones, founder and president, has spent the last five years honing his forex trading skills through managed accounts and feels that the time is right to offer a hedge fund product which he will run in a similar fashion.
“Currencies are really becoming popular and we want to pursue our niche,” said Jones, who produced net returns of 44% last year.
He currently has $9.5 million in assets under management in managed accounts and aims to launch the hedge fund product with $5 million. Jones is not your typical Wall Street bigwig turned boutique investment manager.
The former semi-professional Jazz trumpet player studied both music and physics in college and ran a successful construction firm for ten years before getting into the trading business in the mid '90s. He believes that his varied background, as well as his training in music, has helped him to navigate the complex world of forex trading.
“Monarch Capital has a unique, artistic approach to trading. Our model is hybrid,” he said, explaining that his approach is partly systematic and partly discretionary. “I do have opinions, but I don’t always trade those opinions,” he laughed. Jones, who trades in all major forex pairs as well as liquid cross rates, believes that every investor should have some exposure to currencies in his portfolio.
“We like currencies because they are the deepest, most liquid assets in the world,” he said. “They are not high risk, but moderate risk.” He added that the key to this asset class is effectively managing the risks. Jones views high-volatility as a plus in his sector, but he is open to tweaking his strategy to suit the needs of institutional investors.
“Institutional investors have asked us to lower our volatility and reduce our standard deviation,” he said. “It has gone through evolutions…In August 2004 we re-launched the fund with one-half of the leverage,” which is now 4 to 1.
Another piece of advice Jones recently received was to target a specific volatility. He is now in the process of adding new algorithms to his proprietary trading system which will allow him to do this, and has set his sights on 3% volatility per month.
Jones is still working on the offering memorandum for his hedge fund, but he believes that it will be attractive to family offices and fund-of-funds. He has already received seed capital, and is working closely with Pinnacle Alternative Investments to solidify the details, such as how often to release net asset value and how to structure the fees.