Portfolio Manager Perspectives

Jeff Benjamin

Managed-futures funds shorting U.S. dollar, bullish on precious metals: Equinox's Bornhoft

Oct 5, 2010 @ 11:14 am

By Jeff Benjamin

Shorting the U.S. dollar and going long on certain precious and industrial metals are two ways managed-futures funds are providing non-correlated market exposure, according to Richard Bornhoft, chief investment officer of Equinox Fund Management LLC.

“Right now, there are two major themes influencing the market as it relates to managed futures,” he said. “There is the strong economic data and demand in from China, and the U.S. markets continue to take their lead from weak U.S. data and the quantitative easing by the Fed.”

Equinox has $980 million asset management in managed futures portfolios, including the $120 million MutualHedge Frontier Legends Fund Ticker:(MHFAX). Launched in December, MutualHedge spreads the portfolio assets across five underlying CTA programs, offering unique access to the futures markets through a registered mutual fund.

The commodity trading advisers have the flexibility to invest long, short or go to cash. The underlying CTA programs are selected through a quantitative and qualitative research process that evaluates a universe of 1,600 CTAs.

The overall futures universe includes 150 markets across six sectors, made up of three commodity categories (energy, agriculture and metals), and three financial categories (currencies, stock index futures and interest rate futures).

On the currency side, Mr. Bornhoft said there is strong support for shorting the U.S. dollar. “The dollar is under more pressure, it's trading lower against most currencies and it's at a 15-year low against the Japanese yen,” he said.

On the long side, he pointed to record price levels of gold and silver, which are being influenced by the “worsening fundamentals in the U.S.” Copper, among other industrial metals, is trading higher because of the increased demand from places like China, he said.

“Over the last 10 years, there has been greater volatility in the markets than ever before,” Mr. Bornhoft said. “We want the portfolio to be globally diversified.”

Portfolio Manager Perspectives are regular interviews with some of the most respected and influential fund managers in the investment industry. For more information, please visit InvestmentNews.com/pmperspectives.

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