Monday, 27 March 2017
Last updated 2 days ago
Nov 22 2006 | 4:35pm ET
After reaching its five-year-mark, fund of hedge funds manager PDP Capital Investments is revving up its marketing effort with the aim of growing its two funds to approximately $500 million.
Paul Pomfret, CEO of the Palm Beach, Fla.-based firm, explains that three years ago he reorganized the structure of the funds, which many perceived as a change in strategy, and thus he had to prove himself and his funds all over again.
Since inception in 2000, the PDP Global Growth Fund has had an annualized return of 11.85% and the PDP Global Offshore Fund has had an annualized return of 12.86%. At the same time, the S&P 500 has returned -0.93%, though Pomfret says the MSCI World Index, which has returned 0.02%, is a better benchmark with which to compare the funds.
Now that the “new” strategy has a successful three-year track record—boasts a Sharp ratio of 1.08 for the onshore fund and 1.15 for the offshore vehicle—Pomfret is ready to open it up to outside investors.
“I used to break up the portfolio of 20 managers by volatility,” says the former professional football player, adding that this type of division did not really gel with his philosophy about gaining international exposure, so he tweaked his model and divided the teams geographically.
“My view is pretty simple…if the U.S. economy remains stable, I believe there are faster horses in the emerging markets with companies that have faster growth rates and better balance sheets,” Pomfret says. “Also, I believe that the U.S. economy accounts for an even smaller share of global trade (than it used to), so it appears that global output can continue to expand even if the U.S. runs out of steam.”
The teams, which are broken down into Asian-, Japanese-, emerging markets-, European- and American-focused, all invest in long/short equities. Pomfret prefers to invest with managers who use little to no leverage and are located in the country or region where their fund is focused. In fact, 80% of the underlying managers are located outside of the U.S.
Additionally, 70% of PDP’s managers are closed to new investment. “Our average manager manages about $400 million, and that is small to be closed, but they understand that the liquidity is not there now in the markets,” he says.
The firm charges fees of 1.5% for management and 10% for performance, and there is no lockup period. The minimum investment is $500,000, and Pomfret estimates that he will close the fund when it reaches $500 million.
“I don’t view hedge funds as an alternative investment…I view hedge funds as a vehicle to achieve asset allocation,” Pomfret says.