Robert Drake has been involved with the Asymmetric Convertible
Fund since its inception in May 2002. The other members of
the investment team are David Moore and Mark Gretton.
- How do you define the approach of your fund?
We are a top-down driven convertible fund which focuses
on playing three market cycles - credit, equity and volatility.
- What are the key characteristics of your strategy and
how are you different from your 'peer group'?
Unlike convertible arbitrage funds, we are focused on
much more than volatility trading. Our goal is to play
the credit, equity and volatility cycles incorporating
a large element of long only, short only and volatility
plays. Our preference is to invest in a convertible because
of the natural asymmetry of their pay-off structures but
we also take positions in straight bonds and pure equity.
What are your ideal market conditions?
We have no preferred market conditions. We aim to make
money across the entire business cycle.
- How do you identify convertible arbitrage opportunities?
And what strategies do you employ?
The opportunities we identify are largely derived from
our macro view and the thematic plays that flow from it.
- What have your regional and sector weightings been
In 2003 we were quite heavily focused in US. Since the
latter part of last year, we have been rotating our risk-weighted
exposure to a more balanced allocation to the three key
regions - US, Europe and Asia. We have also significantly
reduced our technology and low-grade credit exposure.
What's your performance been like?
Our fund has two share classes - USD and Euro. Since
inception in May 2002, our annualised returns have been
19.76% and 21.01% for the USD and Euro class respectively.
We have had 18 up months and only 3 down months.
We had a very strong 2003, and were up 22.9% (USD)/24.21%
(Euro) and we've had a strong start to 2004, closing February
up 6.07% (USD)/6.25%(Euro).
Our AUM has grown from US$14 million in 2002 to US$450
million in March 2004.
- What risk controls and measures do you have in place?
We manage our risk at the portfolio level via a risk
management overlay which seeks to limit our systemic exposures
to credit, equity and volatility. We also limit our specific
risk by a haircut approach to all the individual positions
in the portfolio.
- What's your outlook for 2004
From a macro perspective we believe that 2004 is likely
to mark the beginning of the global interest rate tightening
cycle, although we don't believe that the policy response
is likely to be as sharp as, say, 1994.
We believe the overall credit environment is likely to
remain stable, but that the beta play in credit is largely
behind us now. Our cyclical view on equities is bullish
and we increased our allocation to equities in January.
- What's your background and how are the responsibilities
for running the fund divided between the team?
We have a dedicated 10-person team who run the fund.
Additionally we leverage some key resources from Jefferies.
From 2000 until 2003, I was CEO of Pavilion Group, a
US$5 billion AUM fund management group. David and I brought
the hedge fund business out of Pavilion (which was owned
by Seymour Pierce). We then sold a stake to Jefferies
at the end of March 2003. Before Pavilion, I was Head
of International Convertible Bond Distribution at CSFB
from 1996 to 2000. Prior to that, I was Head of Bankers
Trust European Distressed Debt Group. Originally I trained
as an equity portfolio manager.
David Moore, co-manager of the fund and trader, was a
Managing Director at CBI-UBP in London from 1995 to 2002
before coming on board. Prior to this, he was Head Trader
for International CBs at Merrill Lynch International in
Our volatility specialist is Mark Gretton. He was Executive
Director and Head of Convertible Bond Hedge Fund Sales
at UBS in London from 1995 to 2002. Prior to this, he
was with Morgan Stanley and Goldman Sachs.
Adrian Hope is our Risk Manager and COO. He has been
with Jefferies Investment Management since 1994 most recently
as Chief Executive. Before Jefferies, he was a senior
executive responsible for Japanese Equity Derivatives
at James Capel & Co. in London and Tokyo.