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Best directional hedge fund over 10 years

The Global Diversified Programme is Quality Capital Management's (QCM) flagship product.

The fund manager is Aref Karim, CEO and chief investment officer at the company. He brings 27 years of experience in alternative investments with 14 years in the fund management side of QCM.

Since it launched in August 1999, the fund has produced a net cumulative performance of 310%. The fund has an annualised return of 21.71% and annualised volatility at 24.11%.

QCM describes the Global Diversified Programme as a “fully integrated portfolio process and not a trading approach to fund management” using models which are “sophisticated and use a holistic approach”. It encompasses bottom-up and top-down features.

The company does not optimise its models for specific market cycles but looks to perform in most market environments, trending as well as non-trending as proven by its returns during the financial crisis of 2008-09. One of the program’s strengths is that it can provide strong returns in equity bear markets as well as periods when these markets witness sharp sell-offs, according to QCM.

The program offers investors a high degree of liquidity and transparency through its use of futures. It trades in over 80 markets in recognised exchanges worldwide and in some 115 futures instruments across all major asset classes including currencies, commodities, fixed income and equities.

The manager uses a quantitative model-based long volatility approach to managing the portfolio of investments. This uses a proprietary risk/asset allocation tool to move risk around trending and non-trending markets, creating trades that are not held for any fixed timeframe, so they can last for periods of just a few days to months or possibly years depending on market conditions.

Underlying the program are two in-house developed processes. The first is proprietary systematic process, the advanced resource allocator (ARA). This is based on two major market phenomena, long-term momentum and short-term excesses.

ARA dynamically shifts resources between assets and strategies with a view to being over-weighted in those that look relatively more attractive in generating risk-adjusted returns.

The process is dynamic. It captures long-term momentum moves in markets that are fundamentally trending as a result of large shifts in capital flows and uses short-term factors adopting a tactical approach to opportunistically generate short-term gains and to manage risk.

Through back tests and actual experience, QCM says this enhanced approach shows considerably greater returns in the long run for similar downside risk. Risk of underperformance in most economic cycles is severely cut back, claims the management company.

QCM runs a proprietary state-of-the art execution platform, the TEP. This samples high-frequency data through the day and the ARA is used for efficient placement of trades, resulting, the company says, in "strong control of slippage".

The emphasis is on portfolio management rather than market timing. The manager's portfolio perspective is holistic, looking at multiple time horizons and markets for opportunities.

As an investment the Global Diversified Programme is designed to produce long-term capital appreciation and to bear negative correlation to equities and low correlation to other major asset classes including bonds, currencies and commodities.

As well as using its proprietary systems, QCM conducts extensive computer-based research in developing strategies that are capable of performing in varying market conditions. The aim is to generate alpha for investors.

Fund facts
Full name of fund: Global Diversified Programme
Name of portfolio manager: Aref Karim
Name of investment/management company: Quality Capital Management
Contact: Christine Bideau, CM House, 1 Brooklands Road, Weybridge KT13 0TJ, UK (+44 (0)1932 334 400; christine.bideau@qualitycapital.com; www.qualitycapital.com)
Launch date: June 1999
Assets under management: $40 million (at April 30, 2011)
Net cumulative performance since inception: 310% (since August 1999)
Annualised return: 21.71%
Annualised volatility: 24.11%
Sharpe ratio: 0.90
Strategy: systematic managed futures
Share classes: US dollar, euro (standard)
Administrator: Custom House Global Fund Services
Auditor: KPMG (Dublin)
Custodian: Northern Trust Company
Prime broker: Newedge Group
Legal counsel: Crow & Associates (US) and Harney Westwood & Riegels (BVI)
Domicile: British Virgin Islands
Listing: Irish Stock Exchange
Management fee: 2% standard and managed account; 4% leverage;1% reduced leverage
Performance fee: 20%
Minimum investment: $100,000 (or euro equivalent); $10 million (managed account)
Lock-in: none (no gates or redemption penalties)
Redemption/liquidity terms: weekly