The HX2 fund is a two-times leveraged version of StrattonÆs existing Japanese equity long/short Himeji Fund. Morgan Stanley will be the prime broker and Northern Trust will be the administrator.
The targets for the new fund are to deliver twice the returns of the first fund, aiming at 15-20% with volatility of 8-12%.
McEwan has managed the $137 million Himeji Fund since its launch in 2000, whilst Atherton joined him last year. The managers say they strategically favour large caps over small/micro caps and believe Japanese interest rates are about to start rising.
Himeji is a stock-picking alpha-focussed fund with a large- and mid-cap bias. It is not active in futures, and has performed similarly on both the long and short sides of the portfolio whilst running an average 15% net long exposure. That fund has returned approximately 8% per annum at a volatility of 4-6% since its inception in 2000. Over the life of the Himeji fund the Nikkei has lost 8%.
ôHimeji was designed as a low-risk fund that gives good steady returns over an extended period of time, regardless of market direction,ö says Andrew Main, managing partner of Stratton Street in London. ôIts returns have been produced whilst only employing an average 85% gross balance sheet. ThatÆs well below peer group average balance sheet usage. We consider HX2 to have a higher gross position, which will appeal to a different investor base.ö
Launched with approximately $15 million, HX2 will review its capacity at $125 million and thereafter on an ongoing basis, adds Main.
The fund is yen-based with US dollar and sterling classes. It will be domiciled in Guernsey and listed on the Irish Stock Exchange.
Stratton Street Capital is a London-based specialist Asian alternative investment manager with synthetic warrant funds, Japan long/short funds and Asian fixed-income funds. It manages around $300 million of total assets.
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