Shortlist: Best global macro and Best non-directional hedge fund over three years

The IPM Global TAA (tactical asset allocation) strategy is designed as an absolute return product trading the worlds' deepest equity, fixed income and foreign exchange markets in a long/short format.

The investment objective of the fund is to achieve around 20% gross independent of general market direction with low or negative correlation to equity, bond and foreign exchange markets.

The portfolio managers do this by identifying mispricings in four areas: asset classes including global equities versus global bonds versus cash); country stocks such as equity markets in developed countries versus the global average; country bonds including bond markets in developed countries versus the global average; and currencies in developed market currencies.

Bets are taken in all four dimensions where mispricings are detected. The size of the position is linked to the size of the opportunity or mispricing.

The fund only trades the most liquid currency forwards, bond and equity index futures. Its managers simultaneously hold long positions in markets with high relative return prospects and short positions in markets with below-average expected returns.

The portfolio is constructed using exchange traded futures on equity indexes and on bonds. Currency positions are taken via short-dated (usually up to three months) forward foreign exchange contracts with a number of bank counterparties.

The market exposure of the fund generally stays between 8% and 15% of the net asset value (NAV) on a gross basis or a half of this on a net basis. In times of high market volatility the fund’s exposure tends to decrease.

The fund only trades financial exchange traded futures and over-the-counter (OTC) currency forwards. The equity exposure the selections come from the developed markets universe of stock and bond markets. These include Germany, Japan, Australia, Canada, France, Hong Kong, Italy, the Netherlands, Spain, Sweden, Switzerland, the UK and the US. Fixed income exposure is achieved through Australia, Canada, Germany (a proxy for euro bonds), Japan, Sweden, the UK and a bias with the US.

Currency exposures obtained through forward contracts include the US, Australian, New Zealand and Canadian dollars, sterling, yen, Swedish krona and Swiss francs.

Positions are generally held in all instruments traded with no long or short bias. The positions are also not biased to or against any of the assets or currencies.

All trades are implemented either via exchange traded futures on equity indexes and government bonds or short-dated foreign exchange forwards. In addition the focus is medium term, so positions are built up and taken down gradually over time so that the exact timing of each day’s trades has minimal impact on P&L.

The trading emphasises efficiency, minimising market impact and execution costs and managing unintended intra-day exposures. Algorithmic trading is also used to minimise bid/offer spreads.

By design the strategy exhibits a low correlation to traditional investments such as global equity or bond indexes. This relationship extends to the majority of alternative investment styles as well so the product offers meaningful diversification to a broad range of portfolios. This lack of co-dependence spans beyond ordinary long-term correlations, as it often remains valid during tail events and periods of considerable market distress.

At the end of March 2011, assets under management totalled $127 million with a net cumulative performance since inception of 82.6% and an annualised return of 13.5%.

Fund facts
Full name of fund: IPM Global TAA Fund
Name of portfolio managers: Igor Yelnik and Mattias Jansson
Name of investment/management company: IPM Informed Portfolio Management
Contact information: Hanna Enberg, Mäster Samuelsgatan 6, 11144 Stockholm, Sweden (+460 8020 1929;  hanna.enberg@ipm.se; www.ipm.se)
Launch date: July 3, 2006
Assets under management: $127 million; $194.3 million (strategy) (at end March 2011)
Net cumulative performance since inception: 82.6% (at end March 2011)
Annualised return: 13.5% (at end March 2011)
Annualised volatility: 11.1% (at end March 2011)
Sharpe ratio: 1.0 (at end March 2011)
Strategy: global macro
Share classes: A and B (soft-closed); C, D and E (open)
Administrator: Northern Trust International Fund Administration Services (Ireland)
Auditor: PricewaterhouseCoopers
Custodian: Skandinaviska Enskilda Banken    
Prime broker: Skandinaviska Enskilda Banken
Legal counsel: Maples and Calder (Cayman)
Domicile: Cayman Islands
Listing: B shares are listed on the Irish Stock Exchange.
Management fee: 2%
Performance fee: 20% with high-water mark
Minimum investment: €100,000 (C); £100,000 (D); $100,000 (E)
Lock-in: none
Redemption/liquidity terms: monthly with seven day’s notice