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Hermes boutique launches CTA fund to protect against market turbulence

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UK - Hermes BPK Partners, the $2.1bn (€1.5bn) fund of hedge funds manager, has launched a new account fund providing portfolio protection to institutional investors during periods of market turbulence.

The Alpha Vault Managed Futures - launched with an initial capital investment of $275m - will invest mainly in the medium-term Commodity Trading Advisors (CTAs) space.

Hermes BPK said the fund would use CTAs to profit from upward and downward price trends in the liquid global futures markets.

According to the boutique, “trend-following CTAs limit losses in non-trending markets” by using systematic stop losses, while at the same time trying to capture “prominent moves in well-trending markets” through proprietary trading models.

Matteo Dante Perruccio, chief executive and founding partner at Hermes BPK, said: “While CTAs can be volatile, they have very strong diversifying properties with historically high negative correlation to rapidly declining equity markets.

“These characteristics were clearly visible in 2008 when managed futures programmes returned 18% on average despite over 30% declines in global equity markets.”

He added: “In today’s volatile markets, the fear of missing a prolonged uptrend or being hit by a major down-market move makes CTAs a compelling tool for hedging out part of that potential market risk.”

The Alpha Vault fund follows the launch of Hermes BPK Global Equity Hedge Strategies, a $550m customised solution designed to help corporate pension schemes de-risk their long equity exposures through the use of long/short equity funds.

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