The fund seeks to outperform a buy and hold strategy using a unique, multi-factor, macro orientated process which primarily buys US equity markets index futures. The fund also invests in exchange-traded funds giving exposure to particular equity market sectors.
“We believe the markets are subject to big up and down moves,” says Rick Cortez, president, global distribution, at Broadmark. “We are the antithesis of a buy and hold manager. We believe portfolios should be actively traded to protect clients’ assets from decline.”
Though most investment managers define risk as standard deviation or volatility Broadmark defines it as loss of principle. “We believe the first principle of making money is not to lose it,” says Cortez. “We therefore have a process that allows us not to be 100% invested.”
The qualitative components consist of equity valuation, monetary policy and investor sentiment. Valuation and monetary policy are used to assess overall stock market risk. Investor sentiment is a contrarian indicator that identifies high and low risk market environments. The quantitative component signals the direction of a move based on momentum and price data and acts as a risk control mechanism. Momentum factors over one, three and six months are the major input in determining market exposure.
The fund doesn’t use leverage. It can use short sales as a tool to protect from market declines and did so successfully during bear markets in 2002 and 2008. Over 10 years, the fund has been net short at different junctures about 15% of the time. Generally it is either long or in cash.
The investment process is fundamental analysis plus a quantitative model based primarily on volume. The model is looking to identify conditions for the market to move 10% or more over a three to nine month period. When conditions are favourable the fund phases into the market, usually in 10-20 % increments.
A minimum of 70% of the portfolio will be in one or more of six of the most active indexes: the S&P 500; DJ Industrials; Russell 2000; Mid-Cap 400 Index; Nasdaq 100 and MSCI Emerging Markets Index. Sector funds are subject to a 30% ceiling in the portfolio with a 10% limit on any one fund.
Key details
Fund name: UOB Strategic Allocation Fund
Management company: Broadmark Asset Management
Promoter: Broadmark Asset Management
Status: Open
Inception date: 30th September 2010
Strategy
Kind of fund: Hedge Fund
Strategy group: Macro
Sub-strategy: Systematic
Region: North America
Asset classes: Equities
Particulars
Currency: USD, EUR
Share class name: USD Class
ISIN: IE00B63KQG60
Bloomberg ticker: UOBSALA ID
Domicile: Ireland
Listing: Not listed
Fund structure: Investment Company with Variable Capital
NAV calculation: Daily
Liquidity: Daily
Notice (banking days): 1
Minimum investment: 100,000
Min. investment currency: USD
Income: Accumulative
Fees
Entry fee: 0%
Exit fee: 0%
Management fee: 2%
Performance fee: 0%
High water mark: No
Hurdle rate: No
Analysis
Year to Date: -1.00%
Annualised return: 3.95%
2010: 4.00%
Annualised volatility (monthly): 7.15%
Sharpe ratio (2%) (monthly): 0.27
Correlation to S&P 500 (monthly): 97.47%
Correlation to DJ CBOT Treasury: -35.68%
