Deutsche creates note based on QAM hedge fund

The euro-denominated certificate will replicate the performance of QAMÆs global quant fund.
Deutsche Bank has written a euro certificate on the QAM Global Equities Fund, a Singapore-based hedge fund advised by Quant Asset Management.

The certificate is listed on Euronext; Deutsche Bank will make a daily market on the instrument. A euro hedge strategy is applied so that investors can receive a return denominated in euros.

QAM's positions are run entirely on a dynamic, multi-factor quant model concentrating on share price valuation and earnings. The portfolio consists of 80-120 stocks long and a short basket of futures. Gross exposure is 280%, with net exposure of zero (140% long and 140% short).

Assets under management are currently $80 million with the global equity fund accounting for $45 million. The target is to gradually build this fund by another $100 million. The annualised return of the global fund is 31.6%. Geographically, the fundÆs leading concentrations of positions are to be found in the US and South Korea, with 17.2% and 12.3% of the portfolio respectively.

The annualised volatility of the fund is 17.6% and the Sharpe ratio is 1.62.

During the volatility of May 2006, the fund made a negative return of 1.8%, compared to the MSCI World Index, which was down 4.25%.

In addition to the QAM Global Equities fund, the managers also run the QAM Asian Equities Fund. Both funds were launched in April 2004. The managers of the funds are Frank Holle and Chatchai Ngampakdeepanich.

ôThe Asian fund was up 0.91% in May and the global fund down by 1.83%. I think thatÆs a vote of confidence in our model,ö says Frank Holle. ôWe always have our hedges in place. They lose when markets are up, but as weÆve seen, they make money in downward markets.ö

Holle was a director of Merrill Lynch in London before starting a long/short hedge fund in 2001. Khun Chatchai previously worked at Thomson Financial. He is the computer boffin of QAM and has a history in computer engineering.

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