EEA Fund Management has launched a Dublin-domiciled managed futures Ucits fund which aims for an annualised return of 15-20 per cent over three to five years.
Managed by head of trading Darran Goodwin, the EEA Diversified Trends fund includes long and short positions in equities indices, bonds, currencies and commodities and futures contracts.
Goodwin is a commodity trading adviser (CTA), which are managers that provide advice and services related to trading in futures contracts, commodity options or swaps.
The approach is systematic, analysing price momentum to take such positions, rather than the manager taking a view on prices. Goodwin says the strategy has a bias towards commodity markets, in contrast to other CTA strategies that often weighted towards financial markets.
He says: “We are not trading in fundamentals, but we are trend followers. We have to commit to what the system tells us rather than using emotion.”
The current portfolio positioning is a long position on stocks, short on commodities, short the dollar and short the yen.
Goodwin said: “One of the many benefits of CTA/managed futures is their ability to act as a diversifier within a portfolio due to their non-correlation to traditional types of investments. This allows the investment adviser to lower portfolio volatility and therefore enhance risk adjusted returns over the long-term.”
He says that over the last two years there CTAs have seen disappointing performance, as market concerns have pushed them to take a risk-off positioning, and then the market shifts quickly to risk on.
Goodwin says: “The eurozone crisis has been terrible for trend followers, as we start to see a trend and position ourselves for the trend to continue. For example, Spain is looking for a bailout and we position ourselves for risk-off, then the crisis is averted and the trend shifts.”
He adds that the European Central Bank’s commitment to outright monetary transactions in July is a clear sign towards markets are normalising and CTAs should perform better.
The fund currently has fortnightly liquidity, but the aim is to move to daily dealing. The annual charge on the fund is 1.5 per cent and the performance fee is 20 per cent with a high watermark. The minimum investment is £5,000. It is currently available on Transact.