Reno, Nev.-based Jones & Co. has launched a new multi-strategy hedge fund to enhance its portfolio’s returns. The Draco Fund made its debut in December and has returned 1.79% in its first two months of trading.
Draco employs a highly liquid, multi-strategy trading strategy to exploit inefficiencies in the equity, debt and futures markets. It is a systematic fund with a discretionary overlay that attempts to capitalize on short-term market dislocations within a 30-day time frame.
Most of the fund’s profits in December and January came from writing options against equities, according to Kyle Ferguson, vice president.
“A lot of our strategy is capitalizing on the volatility in the equities market,” said Ferguson. “We’re short-term traders so everything we have is 30 days or less. We have no idea what the market is doing this year and we don’t care. But we do have a pretty good idea of what they’re doing in the next couple of weeks.”
The fund launched with $5.2 million and has doubled its assets under management to $11 million. Ferguson said the fund should be managing some $20 million by July 1. The firm is also hoping to attract investors by not charging a management fee and a 25% incentive fee. Michael Abbott is the fund’s portfolio manager.
“Zero percent management fee and monthly liquidity are all the things the industry has to do to move toward to in order to be more client friendly,” said Ferguson.
Jones & Co. also manages a multi-strategy fund of funds, High Sierra Partners I, which dropped 13.14% last year predominantly from its private equity and equity/long short bets. Ferguson said the fund of funds is gravitating toward smaller, short-term futures managers who are more liquid and nimble than their behemoth counterparts.
“The gates and the illiquidity in the hedge fund industry is a problem and we’re not real keen on that right now,” he said.
The firm, which is headed by Trinidad Guillen, currently manages $170 million in total assets.