Newscape Capital targets OECD currencies and rates with new Ucits fund
Newscape Capital Group, the London-based investment and advisory firm, has launched a new currencies-and-interest rates Ucits fund targeting opportunities among the Organization for Economic Cooperation and Development (OECD) economies.
The Dynamic Rates and Currency Ucits fund will be capitalized between $5 million and $20 million at inception, and Newscape will begin trading with the pot this week, says its chairman and CIO Philippe Bonnefoy, who is also the lead manager for the fund. “Philippe has spent over three years developing the quantitative strategy and models behind the fund, and we are excited to be launching it to the market,” says Newscape CEO Stephen Decani.
The new Ucits fund is registered in Ireland, where Newscape set up a Ucits platform in January 2010 from which it has launched two other Ucits funds since September.
The two other funds on Newscape’s Irish platform are: the Newscape Diversified Growth Fund, which is invested in a broad portfolio of single stocks, bonds, currency and hedging instruments; and the Newscape Strategic Bond Fund, which is diversified among government bonds, investment-grade credit, high-yield bonds and emerging market fixed income.
Investors in Newscape’s Dynamic Rates and Currency Fund were recruited during the past year, and they are a combination of small institutional investors and mid-sized wealth advisory firms.
Bonnefoy says the new OECD-centric currencies and interest rates-focused Ucits fund is targeting 12% to 15% annualized returns.
He says the fund will initially be weighted in a similar fashion to the Bank for International Settlements’ top eight most-active currency pairs in its survey, representing around 72% of global turnover in the $5 trillion-per-day FX market.
Bonnefoy says he hopes an anticipated 10% level of near-term volatility in the FX and rates markets means the new fund’s weighting will be aligned with the most active segments of the market.
“We like deep liquidity, which is why we specialize only in the top currency pairs,” says Bonnefoy. “It does not mean there are not opportunities in the emerging markets, but we are always worried about markets that are easy to get into and hard to get out of.”
Bonnefoy adds that trading the fund’s money within OECD currency pairs and interest rates will allow Newscape Capital to balance out trading opportunities with structural inefficiencies among the economies of the 34-nation grouping.
For example, Bonnefoy says there are questions over whether profit-making opportunities for AUD trading at the moment lie in the spot market for the currency or in the medium-term forecasts for the AUD curve and comparing it to an EUR curve or a USD curve.
“We will identify the markets that we think have a tail-wind of opportunities behind them and then, from a portfolio construction side, decide how to express those opportunities down the curve depending on how long we think an opportunity may exist,” he says.
Bonnefoy says he is a USD bull, and he will use short-term quantitative modelling of structural differences emerging between economies to screen out noise from the macro risk-on/risk-off environment.
“While there are current unknown elements of risk in the US market, ultimately the potential for growth there in the near- to medium-term is much higher than the European economy,” he says.