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Tideway Investment Partners LLP - High Returns with low Volatility
The Global Navigator Fund, launched in September 2011 on the Alceda platform, is a Luxembourg domiciled UCITS IV Global Macro Absolute Return Fund that aims to generate high single-digit returns with low volatility through the full economic cycle by investing in fixed income, currencies and some equities. The UCITS structure provides daily liquidity and pricing is attractive with a 1% annual management charge, no associated performance fee and no redemption fee.
The Fund uses a multi-asset approach, focusing on fixed income and currencies to deliver stable growth. Equity market exposure is capped at 15% of the portfolio. Initial seed capital came from a combination of Tideway in-house funds, partner capital and a number of early investors. The fund is a continuation of PM Peter Doherty’s investment strategy with his own capital since 2008 which has produced returns of over 55%. Peter has over 20 years’ experience in fixed income, currency and derivative structuring and sales at Goldman Sachs, Bear Stearns, Bank of America, Solent Capital and Markit.
In the aftermath of the credit crisis the significant increase in regulation resulted in a number of structural changes across many market segments. The impact of these changes in the global regulatory framework e.g. Basel III has provided new investment opportunities as institutions adjust to comply with the new requirements. These changes combined with the on-going uncertainty with regard to sovereign stability, particularly in Europe, mean credit markets remain extremely challenging with a number of assets exhibiting stressed pricing. Peter’s philosophy is to be patient in waiting for opportunities but to be decisive and active when those opportunities present themselves. With the extreme market volatility across all asset classes as the fund launched in September the focus was on investing in well-researched assets to weather market turbulence and looking for relative value opportunities where major market directional moves have created pricing anomalies.
As a result an initial portfolio of core bond holdings was structured with early investments focused on
- Short to medium-term corporate and financial bonds from large, well-capitalised entities
- A small exposure to “special situation” bonds where we have a high degree of conviction of full repayment
- Relative value opportunities in UK gilts.
As uncertainty continues ahead of a much anticipated policy response from Europe we see further upside for these strategies. Around these core strategies, trading opportunities in interest rates remain interesting. While currencies remain trendless, with option implied volatilities still on the high side, there will be opportunities for covered option writing.
About Tideway Investment Partners LLP
Founded in 2009 Tideway Investment Partners are specialist investment advisers focusing on top-down investing in medium term macro-economic themes. The firm manages assets for HNW private clients in London, Hong Kong and USA. Tideway’s offering focuses on bespoke fixed income and multi-asset portfolios for individuals and trusts. They also offer complex pension advice for senior executives and discretionary managed model portfolios for IFAs. Tideway is the adviser to the Alceda Global Navigator All Weather UCITs IV Fund.
Contact
Tel.: +44-203 178 5982
Email: catherine.dooley@tidewayinvestment.co.uk
Web: www.tidewayinvestment.co.uk
Peter Doherty, Partner & CIO Tideway Investment Partners LLP, London:
Hedgework: AAA-government bonds became a very good investment this year. What do you expect next year?
Peter Doherty: The premium for certainty is extremely high at the moment. Countries which are solvent and retain full control over their currency and fiscal / monetary policies are being rewarded by huge capital inflows which have led to record low yields. Investors can still expect to make positive real returns from AAA government bonds over the next 12 months if the Eurozone Crisis is not resolved. In addition, Global Banking recapitalisation and deleveraging is underway and with economic growth slowing there are further reasons to expect AAA bonds to remain at low yields.
Hedgework: When do you expect an increase of interest rates?
Doherty: Lowering the annual budget deficit and also the total debt to GDP ratio is a priority for the US, UK, Japan and many Eurozone economies. This can be done through economic growth, inflation, austerity or some combination of all three. No scenario other than self-sustaining economic growth, lowering of unemployment levels AND an extended period of higher than expected inflation will lead to any of the central banks raising interest rates. For this reason it is clear that 2012 will not be the year when interest rates will start to go up in the developed economies.
Hedgework: Risk premium on corporate bonds have skyrocketed. Do you feel this is exaggerated?
Doherty: Corporate Bonds are one of the most attracive asset classes in the world at current prices. The prices reflect not only extreme risk aversion from investors, but also the powerful combination of smaller bank trading book positions and the lower appetite for banks to lend direct to corporations. In short, more companies with strong balance sheets are issuing bonds at a time when bank trading capacity is much reduced and falling.
