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Cumberland introduces Market Neutral Fund


Date: Thursday, November 4, 2010
Author: IE Staff

Tech-focused strategy designed to produce positive returns in volatile markets

Cumberland Private Wealth Management Inc. has launched a new Market Neutral Fund offering investors a way to diversify their wealth portfolios with a strategy uncorrelated with the ups and downs of the markets, the Toronto firm said Tuesday.

Focusing on the technology sector, Cumberland’s Market Neutral Fund is designed to earn a positive absolute return while limiting market and liquidity risks by exploiting pricing inefficiencies across public markets, primarily NYSE-listed and NASDAQ-listed equity securities.

The fund is intended for high-net-worth individuals, financial advisors, family offices, and smaller institutional investors.

“A market neutral fund can be a difficult concept to grasp for some investors traditionally used to making money when markets go up, and losing when they go down,” says John Wilson, chief investment officer, Cumberland.

“However investors today are looking for alternatives in a volatile market that has limited yield -- market neutral funds can play a vital role in optimizing overall portfolio risk, while enhancing long term portfolio returns.”

Wilson, who ran a similar successful market neutral Ffnd before being named Cumberland’s CIO in 2009, says such funds can be set up in various asset classes including equities, bonds or futures as long as the strategy is able to identify and predict a significant market inefficiency.

Cumberland believes equities in the technology sector have several characteristics that lead to highly inefficient pricing which the Cumberland Market Neutral strategy is designed to exploit:

> accelerating pace and complexity of innovation leading to constant cycles of renewal and obsolescence;

> disruptive new technologies which often cause significant market share changes within an industry; and

> many barriers to investing such as number and complexity of acronyms, evolving and competing technology standards, among others

Cumberland says its Market Neutral Fund uses offsetting long and short positions to reduce overall market risk as well as specific sector and industry risks. The strategy also protects against liquidity risks through being primarily weighted in larger corporations with over US$500 million market capitalization.