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SciVest launches Cayman-based global net short equity fund

Date: Monday, January 29, 2007
Author: Hedgeweek.com

Toronto-based quantitative global investment manager SciVest group has launched the Cayman-domiciled SciVest Global Net Short Equity Fund. The fund is an offshore version of its top-performing Canadian-domiciled Net Short Equity Fund, which has consistently been ranked as one of the world's top-performing equity short-biased funds since its launch in July 2004.

'We have decided to create an offshore version of our SciVest Net Short Equity Fund to capitalise upon the success of the onshore fund and to meet the overwhelming offshore demand for our net short equity investment strategy,' says Dr. John J. Schmitz, portfolio manager for both the onshore and offshore net short equity funds.

'We use the same quantitative investment models and risk management processes for both funds. The primary enhancements in the offshore fund relative to the onshore fund is first, the offshore fund has a lower target equity market beta of -0.75, versus -0.50 for the onshore fund, to provide investors with a stronger equity market hedge per dollar invested.

'Second, the offshore fund has a global mandate, investing in 14 of the largest developed markets, versus the North American mandate of the onshore fund, to provide investors with better alpha diversification. Finally, the offshore fund has a higher long-term leverage factor of 4:1, versus 3:1 for the onshore fund, to provide investors with a higher absolute level of alpha.'

The investment objective of the Global Net Short Equity Fund is to provide investors with a strong, predictable hedge to the global equity markets that will, over a full economic cycle, generate returns competitive with other investments of similar volatility risk.

'Assuming the investment objective is met, the offshore fund will provide a significant risk-return contribution to literally any portfolio which has any equity market exposure whatsoever,' Schmitz says.

SciVest's net short equity strategy takes a different approach from most traditional short-biased funds in that it is highly risk-controlled and diversified, attempts to add alpha on both the long and the short sides of the portfolio, and has a fixed target beta or market exposure.

Unlike simply shorting a stock index, the Global Net Short Equity Fund aims to add significant, risk-controlled alpha which effectively gives investors equity market 'insurance' that more than pays for itself. The Global Net Short Equity Fund is aimed at funds of funds, pension funds, endowment funds and other sophisticated investors, and is currently open to new investment.

Founded in 1999, SciVest says its completely disciplined and systematic investment processes focus strictly on creating diversified, risk-controlled, fundamentally sound portfolios. Its quantitative models evaluate the expected returns, risks and trading costs of every stock in the stock selection universe of more than 7,000 publicly-traded, liquid, global equities from 14 developed countries.

The stock selection models are dynamic in that they adapt to changing market conditions and changing stock characteristics, and are comprehensive in that they incorporate more than 100 fundamental, technical and sentiment-based stock selection factors.