NewGen Trading Fund - waisc. Expected turnover of 5-6x per year ... The Scotiabank Canadian Hedge

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Transcript of NewGen Trading Fund - waisc. Expected turnover of 5-6x per year ... The Scotiabank Canadian Hedge

  • NewGen Trading Fund Equity long-short trading strategy

  • Disclaimer

    The information in this document is furnished on a confidential basis exclusively for your use and retention and, by accepting thisdocument, you agree not to transmit, reproduce or make available to any other person (other than your legal, tax, accounting and otheradvisers) all or any part of this document without the express written permission of NewGen Asset Management Limited (NewGen).This document is protected by copyright of NewGen and other laws, all rights reserved. It is not intended as and does not constitute anoffer to sell any securities to any person or a solicitation of any person of any offer to purchase any securities. Such an offer orsolicitation can only be made by the confidential offering documents of the investment fund and no offer will be made in Canada, theUnited States of America or, any jurisdiction in which it would be unlawful to do so without the need for registration or other legalrequirements. This information omits most of the information material to a decision whether to invest in an investment fund. No personshould rely on any information in this document, but should rely exclusively on the offering documents in considering whether to investin an investment fund.

    NewGens analysis and projections regarding portfolio company operating and investment results are subject to many risks,uncertainties and assumptions that are difficult to predict. Therefore, actual returns from an investment in any such company could differmaterially and adversely from those expressed or implied in any forward looking statements, as a result of those various factors.NewGens expected results and projections are provided for information regarding NewGens investment analysis, not as any guaranteeor expectation of investment results for any fund's investment portfolio.

    No representation is made on the accuracy or completeness of the information contained in this report, and the sender does not acceptliability for any errors or omissions in the contents of this report. NewGen does not guarantee the appropriateness of any investmentapproach or security referred to for any particular investor. NewGen, its affiliates and/or its clients may have an investment position in asecurity or strategy (or related or opposing security or strategy) discussed in this information, and may change that position withoutnotice at any time. This material is provided for informational purposes only and is not investment advice or a recommendation for thepurchase or sale of any security.

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  • Overview

    Toronto based investment manager of equity long/short strategies

    Registered with OSC as a Portfolio Manager/Investment Fund Manager/ EMD

    Investment Advisor:

    NewGen Trading Fund LP

    NewGen Trading Fund RRSP

    NewGen Trading Fund Offshore

    Strategy AUM - C$76 million

    Investment Team 3 portfolio managers Generalist and resource sector focused backgrounds

    Complementary trading and fundamental research experience on both the Buy-Side and Sell-Side

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  • Why NewGen?

    NewGen Philosophy:

    We fundamentally believe that equity markets

    are inefficient over short term time horizons.

    Our strategy seeks to exploit those inefficiencies to:

    Deliver an authentic absolute return product Produce superior risk adjusted returns Preserve investor capital in protracted downturns Generate a unique return stream to diversify investor portfolios

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    1. Inception July 2012; performance reported net of all fees for Class A Series 1 Units; effective February 1, 2013 the Fund changed its base currency from USD to CAD, presentation of performance data prior to this date assumes USD hedged to CAD

    2. The Sharpe Ratio is a hypothetical measure of excess return and the US 5-year Treasury yield is used for the risk-free rate in its calculation

    3. As of presentation date, combined Assets Under Management (AUM) includes the NewGen Trading Fund, NewGen Trading Master Fund, NewGen Trading Fund LP and the Polaris Resource Trading Fund

  • Market Opportunity

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    Long Biased/Buy & Hold/Value FocusedUnsophisticated Market Participants

    Certain sectors require specialist knowledge (i.e. mining, energy,

    technology, etc)

    Long Biased/Buy & Hold/Value FocusedUnsophisticated Market Participants

    Certain sectors require specialist knowledge (i.e. mining, energy,

    technology, etc)

    Price

    Inefficiencies

    To Exploit

    Price

    Inefficiencies

    To Exploit

    Diminished Liability TradingBanks are now allocating far less capital for liability trading, creating less efficient

    markets

    Diminished Liability TradingBanks are now allocating far less capital for liability trading, creating less efficient

    markets

    Growth of Algorithms and High Velocity Trading

    Creating frequent errors and price distortions

    Growth of Algorithms and High Velocity Trading

    Creating frequent errors and price distortions

    The End of Prop DesksLargely eliminated from financial

    institutions due to Volker Rule (prohibitsbanks from engaging in trading that is not

    at the behest of its clients)

    The End of Prop DesksLargely eliminated from financial

    institutions due to Volker Rule (prohibitsbanks from engaging in trading that is not

    at the behest of its clients)

  • NewGen L/S Trading Strategy

    Employ an opportunistic long-short equity trading strategy (broad sector exposure)

    Ideas are derived from a bottom up approach based on fundamental research

    Implementation of any specific idea typically requires: a pre-determined catalyst

    within set time horizons

    profit/loss assessments

    liquidity analysis and an exit strategy.

    Fund strategies include: event-driven trades, pairs trades, IPO/secondary offeringparticipation, index additions/deletion predictions, clean-up/block trades,momentum/technical trades and risk arbitrage.

    Seek to consistently monetize trading gains derived from catalysts

    Broad portfolio risk including net and gross exposures, sector exposure, volatility, andcorrelations are monitored to ensure the portfolio adheres to the Funds mandate.

    Ability to drastically reduce portfolio exposure in difficult market environments

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  • Target Portfolio Composition & Characteristics

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    Market RiskMarket Risk

    ConcentrationConcentration

    LiquidityLiquidity

    Risk ToleranceRisk Tolerance

    LeverageLeverage

    TurnoverTurnover

    Time HorizonTime Horizon

    Market CapMarket Cap

    Market-neutral Long-bias

    Concentrated Diverse

    Illiquid Highly liquid

    Capital preservation Capital appreciation

    No leverage Use of leverage

    Passive Active

    Short Long

    Small-cap Large-cap

    Typical net exposure range -10% to 50% (avg ~30%) Alpha focus, minimal equity beta Typical net exposure range -10% to 50% (avg ~30%) Alpha focus, minimal equity beta

    30-40 core positions on average (long / short) 3-5% core position size 30-40 core positions on average (long / short) 3-5% core position size

    Highly liquid portfolio, all positions evaluated relative tounderlying liquidity (avg position size vs ADV = 5-15%)

    Highly liquid portfolio, all positions evaluated relative tounderlying liquidity (avg position size vs ADV = 5-15%)

    Active risk management Target significant short attribution Active risk management Target significant short attribution

    Typical gross exposure range 80-170% (avg ~150%) Bottom-up opportunity driven Typical gross exposure range 80-170% (avg ~150%) Bottom-up opportunity driven

    Active portfolio management Expected turnover of 5-6x per year Active portfolio management Expected turnover of 5-6x per year

    Trades are generally short-term in nature (i.e. 10-30 dayholding periods)

    Trades are generally short-term in nature (i.e. 10-30 dayholding periods)

    Portfolio represented by all market caps, but general biastowards small and mid-caps as liquidity permits

    Portfolio represented by all market caps, but general biastowards small and mid-caps as liquidity permits

  • Value Proposition

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    Demonstrated ability to generate performance through alpha, rather than beta Sharpe(1.8) Demonstrated ability to generate performance through alpha, rather than beta Sharpe(1.8)

    Returns (16.7% Annualized)Returns (16.7% Annualized)

    Able to tactically move across markets, sectors and strategies depending on themarket opportunities

    Strict adherence to liquidity bias

    Able to tactically move across markets, sectors and strategies depending on themarket opportunities

    Strict adherence to liquidity biasLiquid and NimbleLiquid and Nimble

    Aim to minimize downside through balanced portfolio of long & short ideas No individual oversized positions No reliance on privates or derivatives to generate return Quickly reduce portfolio exposures under negative market conditions

    Aim to minimize downside through balanced portfolio of long & short ideas No individual oversized positions No reliance on privates or derivatives to generate return Quickly reduce portfolio exposures under negative market conditions

    Preserve CapitalPreserve Capital

    Unique return stream uncorrelated to broad equity markets Unique return stream uncorrelated to broad equity marketsUncorrelated Return (.22 Cor)Uncorrelated Return (.22 Cor)

    Risk (8% SD) Risk (8% SD) Strategy seeks to remove this unwanted market and systemic risk Strategy seeks to remove this unwanted market and systemic risk

  • Risk Management

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