The Enovara RQSI GAA fund started in September 2009 with a “simple” UCITS commitment ceiling of 200%, with position limits 50% or lower than RQSI’s offshore fund limits and a correspondingly lower volatility target than the offshore fund.
Nomura’s UCITS realised volatility is running at 5.5%: inside the 7% yearly target and at a fraction of the sophisticated UCITS volatility limit that now applies. In response to investor demand, Nomura upgraded the vehicle to a “sophisticated” UCITS to allow close replication of the offshore performance: tracking error is expected to be less than 80 bps annualised for the RQSI Plus share class launching in Q2 2011.
RQSI have always operated at lower levels of volatility than comparable strategies: since 1997 their programmes have averaged around 11% annually. This is not their only differentiator.
Whereas most traditional trend followers struggled in range-bound 2004 and shot the lights out in volatile 2008, RQSI’s previous programme had a strong 2004 and a flat 2008, because their models have never been dominated solely by momentum.
With the new GAA strategy, RQSI has further decoupled from the peer group: making good money in 2009 when others were flat or down, and reaping all of its 2010 profits before the fourth quarter that accounted for most CTA returns in that year.
On top of technical price data, RQSI takes account of fundamental economic inputs and put on calendar spread trades in bond, commodity and currency markets, sometimes to earn yields. Such term structure trades are one of several types of relative value or arbitrage strategies employed to complement directional approaches.
The investment universe encompasses developed markets and the instruments traded are all exchange listed. RQSI only adds new markets that are diversifying and have a sufficient history of high quality data to be amenable to the range of analytical techniques used.
The UCITS fund is structured so that a 20% drawdown requires Nomura to stop accepting subscriptions, and a 25% drawdown forces Nomura to return capital to investors. Since either event would be around four times current volatility, they are seen as unlikely, but useful, safety valves appreciated by some investors.
Key details
Fund name: RQSI Global Asset Allocation Fund
Management company: Nomura
Promoter: Nomura
Status: Open
Inception date: 10th September 2009
Strategy
Kind of fund: UCITS
Strategy group: Macro
Sub strategy: Systematic
Region: Global All
Asset classes: Equities, currencies, interest rates, sovereign bonds, commodities
Particulars
Currency: USD, EUR, CHF
Share class name: USD I
ISIN: IE00B41S4C07
Domicile: Ireland
Fund structure: Investment Company with Variable Capital
NAV calculation: Daily
Liquidity: Daily
Notice (banking days): 1
Minimum investment: 500,000
Minimum retail: 10,000
Minimum investment currency: USD
Income: Accumulative
Fees
Entry fee: 0%
Exit fee: 0%
Management fee: 1%
Performance fee: 15%
High water mark: Yes
Hurdle rate: Yes
Hurdle: Libor USD 1m
Analysis
2010 return: 9.08%
Annualised return: 8.94%
Annualised volatility (monthly data): 5.16%
Sharpe ratio (2%) (monthly data): 1.35
Correlation to S&P 500 (monthly data): 58.73%
Correlation to iBoxx (monthly data): -14.07%
Service providers
Administrator: State Street Fund Services
Custodian: State Street Custodial Services
Auditor: PricewaterhouseCoopers
Lawyer: Maples and Calder
