Asian Equity Markets Absolute Return
Background:
The Asian Markets Absolute Return Equity Programme commenced in June 2010. It is a long / short equity strategy that offers exposure to Asian equities and seeks to generate absolute returns.
Investment Approach:
The Asian Absolute Return Equities Programme combines both top down and bottom up components. We believe that at any point in time there is an identifiable set of factors that drive earnings, valuations and stock prices over the short to medium term.
These factors can be macroeconomic, cyclical or structural and can be global, regional or country specific. Identifying these key drivers and market expectations for them is the first step in our investment process.
Our stock selection then identifies those stocks that offer attractive risk/reward characteristics relative to these key drivers. This will sometimes lead us to pursue contrarian opportunities but in other cases stocks with high expected earnings potential will be attractive. The identification of catalysts necessary to unlock value is an integral part of our investment research process. Our investment approach has both ‘growth’ and ‘value’ elements and leads us to a ‘style’ neutral portfolio. We believe that corporate governance is a significant element of any stock’s risk/reward profile and our research addresses the subjective issues that link corporate governance to valuations.
The portfolio is constructed to emphasise our investment ideas; and hedges are actively utilised to manage and eliminate correlated risks within sectors, countries and portfolios. The hedging approach focuses the risk allocations and allows investment performance to clearly reflect our intentions.
The key investment ideas in the portfolio include: stand-alone stock ideas (longs/shorts), directional trades (countries/sectors), intra-sector pairs (relative value/hedging to take out non-core risk), cross sector pairs (thematic pairs /hedging to take out non-core risk) and an active currency overlay. Currency exposures are a related source of portfolio risk and reward and are explicitly managed to add alpha (although our bias is to be long Asian currencies, there are times when the signals from our proprietary currency models motivate us to hedge our exposures).
Net exposures (long/short beta) and country allocations are actively managed reflecting three elements: top down assessments, bottom-up opportunities and risk controls. Country risk remains the largest element of portfolio risk in Asian markets and effective risk control requires careful attention to exposures. The primary risk management methodologies utilised are exposure limits and stop-loss policies. Liquidity is carefully monitored and holdings are avoided that cannot be liquidated over a reasonable time frame.
Programme Description:
| Description: | Absolute Return – Asian Markets Equities |
| Investment Style: | Active Equities - Fundamental/Corporate Governance/Active Currency |
| Target Returns: | 15% per annum (rolling 3 year periods) |
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| Investment Universe: | |
| Selection Universe: | Broad Market (subject to liquidity limits) |
| Region: | Developed and Developing Asian Markets |
| Instruments: | Equity Instruments/Derivatives (inc. FX)/ETF/Indices or basket exposure |
| Investment Limits: | |
| Country Limit: | 45% |
| Sector Limit: | 45% |
| Single Stock Limit: | 10% |
| Single Stock Stop Loss: | rolling 20% loss |
| Maximum Gross Exposure: | 200% |
| Maximum Net Exposure: | +200%/-50% |
| Structural Details: | |
| Vehicles: | Pooled Fund /Managed Account |
| Liquidity: | Monthly |
| Minimum Investment: | Pooled Fund US$250,000 / Managed Account US$10,000,000 (or equivalent) |
| Investment Manager: | The Cambridge Strategy (Asset Management) Limited |
| Management Fees: | 1.5% per annum |
| Performance Fees: | 20% performance fee above benchmark (with high-water mark) |
Awards
The Cambridge Strategy Emerging Markets Alpha Programme
The Cambridge Strategy Asian Markets Alpha Programme
