Shortlist: Best global macro hedge fund

Shortlisted 2010
Best global macro hedge fund

With a management style described as an eclectic, pragmatic investment approach, Adrian Owens, fund manager of the GAM Global Rates Hedge Fund, combines a range of fundamental and technical methodologies to get the best out of government bonds and currencies.

The fund was launched in January 2004 since when Owens has been using an entirely discretionary approach to investing, central to which is understanding of how macro factors drive market behaviour. The aim is to achieve net absolute returns of US dollar Libor plus 8%-12% a year over rolling three to five-year periods.

The uncertain markets of 2009, on which the manager says the strategy thrived, saw the fund return close to 18% for investors and the annualised return stands at 10.60%.

Owens is an economist and an investment manager with over 20 years of experience. His discretionary, global macro style has economic fundamentals at its core and uses a set of tools encompassing fundamentals, technicals, sentiment, downside risk, upside potential and conviction of each specific opportunity, to realise his investment ideas.

He will change the emphasis to focus on the tools that work best in each market in the current environment. The highly liquid nature of the fund also means that over 90% of the assets could be unwound within three days with minimal performance impact.

Although economic factors drive market behaviour, Owen believes market anomalies arise when people make decisions for non-economic reasons and that some participants such as systematic traders serve to exacerbate certain trends.

The fund looks to exploit these inherent market inefficiencies, producing competitive returns over short, medium and long-term investment horizons.

Owens is able to leverage the fund's positions, generating a notional exposure in excess of the fund's net asset value (NAV) when calculated using VaR methodology.

Owens' investment process begins by taking a top-down macroeconomic approach to define the market paradigm, identifying the key drivers of current market behaviour. He then uses ongoing research and his experience of market dynamics, focused mainly on developed markets, with opportunistic research on promising emerging markets, to identify countries or currencies that may present good investment opportunities or economic stories within the market paradigm.

Finally, he focuses on how he can capture these by creating valuation metrics for each good economic story and selecting trades to realise them.

Being a trained economist Owens focuses on conducting a detailed assessment of policy-setting and economic data from central banks and statistical offices within individual economies to develop his own economic view from first principles. That analysis is primarily focused on the G13 countries, Scandinavia and Australasia but he will pursue specific ideas in other countries where he believes they may exist.

With a strict focus on minimising downside risk and maintaining reasonable and accurate expectations for potential upside gains, Owens looks to build a diversified portfolio of typically 10 medium-term themes accounting for 60%-80% of risk capital and each comprising three to five positions.

Individual positions within themes are expected to be made up of two legs, for example, a long two-year position and a short 10-year position. In addition there may be up to a further 10 short-term tactical trades.

The portfolio will also pursue a limited number of short-term tactical opportunities unrelated to themes. These comprise typically 20%-40% of risk capital.

The approach is global with 90% developed/10% emerging markets.

Fund facts
Full name of fund: GAM Global Rates Hedge Fund
Name of portfolio manager: Adrian Owens
Name of investment/management company: GAM
Contact information: Lynn Mah, 12 St James’s Place, London SW1A 1NX (+44 (0) 20 7393 8848; lynn.mah@gam.com)
Launch date: January 2, 2004
Assets under management: $353.8 million (at March 31, 2011)
Annualised return: 10.60%
Annualised volatility: 7.35%
Sharpe ratio: 1.09
Strategy: global macro fund, investing in government bonds and currencies.
Share classes: US dollar, sterling, euro, yen, Swiss franc
Administrator: JP Morgan Hedge Fund Services
Auditor: PricewaterhouseCoopers
Custodian: Citigroup Global Markets
Prime broker: Citigroup Global Markets, Newedge
Domicile: Cayman Islands
Listing: Irish Stock Exchange
Management fee: 1.5% (excludes administration & custodian fees)
Performance fee: 20% of the appreciation in the net asset value per share above three-month Libor on a high water mark basis
Minimum investment: $500,000
Lock-in: none
Redemption/liquidity terms: subscription is first business day of each month with one business day's notice given prior to the deal date; redemption is any dealing day with 30 calendar days' notice given prior to the deal date; where the final day falls on a non-business day, notice is given by the previous day