Finance: Providing the best in the business

PHUKET: Following on from my article about the Millennium fund, I am writing this week about some Wall Street legendary fund managers that you can now access with relatively small allocation in a portfolio.

Belmont has made its main business out of selecting the absolutely best managers in the world and offering access to them at reduced minimums.

While the fees may be slightly higher because of this, I don’t mind paying up when they deliver the results they typically do. While not always true in life, sometimes you really do get what you pay for, and asset management is not an area where I will be cheap, assuming I understand what the managers are doing of course.

One such fund is managed by Abraham Trading Company, founded by Salem Abraham in 1988. (The Fund) attempts to profit from perceived opportunities in the global commodity and financial futures markets through a mix of trend-following, mean-reversion and short-term momentum strategies. All investing is done on a systematic basis.

Although these opportunities are taken in currencies, fixed-income and stock indices, the majority of the fund’s exposure is to the global commodity markets, such as metals, energies, meats, grains and softs. The firm and its senior professionals have built one of the longest continuous track records of successful research and performance in the managed futures industry.

The fund has produced almost 20% annualized returns since 1993, but obviously with a much higher volatility level that makes this one more geared to those out there with some tolerance for risk. It has a drawdown of almost 50% and standardized volatility is about 42.5%.

While this would be a lot as a stand-alone investment, a small holding in this fund, which is not correlated with the stock market, could thus actually bring down the overall volatility of a portfolio holding a lot of stocks. This fund has traditionally posted returns far above average in years when the markets crash.

Another Wall Street legend is William Eckhardt. He started his fund in 1991, and has also generated one of the best track records out there.

The fund seeks to profit from short, medium and long-term trends in the global financial and commodity futures markets on an entirely systematic basis.

Opportunities are sought across a wide range of the most liquid currency, fixed-income, equity and commodity markets. The returns have averaged slightly less than Abraham’s fund, about 16.5% per annum, but it came with much less volatility. The annualized volatility has only been about 28%, although worst drawdown was about the same.

The great thing about having funds like these with minimums at US$10,000 is that even a portfolio of 100K could hold a 30% CTA allocation diversified across three high-class managers that you cannot invest with directly for less than 1 million dollars. That is a very big advantage provided by this range from Belmont and well worth looking into to help protect any stock holdings from the next inevitable crash.

Even against a portfolio that is mostly cash, a 15 to 25% allocation to these funds would have boosted your overall return these last years, up to something more reasonable while still maintaining the bulk of your cash in asset classes where your principal could be safely protected, which is the real name of the game in the long run.

David Mayes MBA resides in Phuket and provides wealth management services to expatriates around the globe, focusing on UK pension transfers. He can be reached at david.m@faramond.com or 085-335-8573. Faramond UK is regulated by the FCA and provides advice on pensions and taxation.