Edgefolio has decided to start an initiative that will feature some of you to a series of interviews. It will be known as: “Edgefolio Spotlight”.
Since our main value proposition is to help you market your funds in a modern and compliant way, we want to start using our communication and PR tools to support you even more.
Interview with Angus Cameron:
Please give a brief introduction of yourself and the fund:
“I started my career on the call center floor of an Australian equities broker, gradually moving through into hedge fund and alts sales with a large private bank. A love for an unconstrained, multi-asset approach saw me take on a role as an allocator for a first-gen, single family office in Sydney, which carries a global, absolute-return mandate with a FoF-style structure. The family office has done well as an allocator to early-stage or day 1 managers and recently took that approach one step further, taking the seed role in the PCS Global Volatility Fund – a relative value volatility fund.”
What is your role?
“CEO/COO. As I see it, my job is to let the CIO and Senior PM spend as little time as possible in the weeds of the operations, so they can do their jobs and perform as I think they will.”
Brief hisotry of the fund.
Inspiration/motivation for starting:
Standalone global vol funds trading volatility risk premia with discretionary overlays are relatively rare, particularly in the southern hemisphere. Our rules-based use of variance swaps also differentiates us, as the vast majority of vol funds focus on the VIX.
As an allocator, I look for investment strategies that carry a structural advantage in what they do – it doesn’t mean they make money in a straight line, but it gives me some confidence that they have a headstart. The strategy behind the Fund made sense to me in the family office portfolio; consistent, a controlled drawdown profile with a strong structural thesis as to why it should make any losses back in a reasonable time frame. It was something that I could see would be a good cornerstone investment, without correlation to the rest of our portfolio.
The now-CIO who designed the Fund’s strategy wanted to keep the AUM low ($500m hard cap) to avoid alpha-decay and stay true to his IP, preferring the family office surrounds and support to an institutional model, who are looking to create multi-billion dollar businesses. We believe we have a product that can really work in a family office portfolio, being a genuine alternative source of alpha, not just beta in disguise.
“Early days, we managed to launch straight into ‘Volmaggedon,’ but we have dealt with some very poor conditions for the strategy well and are flat for the first year, having ticked up consistently (~+6%) since Q1 while the broad hedge fund indices are flat or down. We are gradually building out the data points to illustrate that we can be an alternative source of alpha in an alternatives bucket.”
What is the goal of the fund?
“Double-digit returns over reasonable time periods with a Sharpe >1.5, keeping drawdowns to the mid-single digits when they inevitably occur.”
How did you manage to escape the “Tipping Point” and achieved break-even?
What is your unique value proposition?
“Our CIO, Jason Petras, has a unique background, starting his career as a software engineer for Boeing, before slipping over to the dark side, building exotic option models for investment banks in London, then taking his skill to the buy side in Hong Kong. His background is key – we take a rules-based approach to vol-risk premia using variance swaps, and overlay it with real convexity; as such we need the engineer’s brain to stick to his models, the risk manager’s understanding of a complex instrument, and a buy-side’s trading touch. Most of the volatility funds I have seen are reliant on a manager to trade as they like to generate alpha, Jason has developed a sensible, risk-sensitive engine room which we believe will work well over the cycle, by structurally controlling risk in market sell-offs, and is able to capitalize on the higher volatility that follows..”
How do you market your uniqueness?
“Given the nature of our Fund (and even the instruments in it) is certainly not second nature in the family office community, we have spent much of our early stages educating with white papers, short notes intra-month to help investors understand the risk profile we run. Being very early-stage, we need a few more data points to help fill out the differentiators.”
Is this method effective?
“Too early to tell, we have been mostly internal capital until now, and are looking to take on external from here – hence the use of Edgefolio to manage our IR!
“I’ve always believed that if I find the right strategy, with the right people, in the right environment, then why do I need to worry about how long their track record is?”
What is most difficult for early-stage funds?
Finding a balance between the constant barrage of regulatory and operational requirements, while raising money to keep the lights on. I’ve also found that allocators who have the confidence to think about strategy before returns are extremely rare – for me I’ve always believed that if I find the right strategy, with the right people, in the right environment, then why do I need to worry about how long their track record is? I met a large family office in Melbourne recently, and the allocator there was literally the first one I’ve met who said he looked at prior returns last! It was refreshing – he has significantly more experience than me, managing significantly more money – but we looked at things in a very similar way.
Hedge funds in the exotics space often struggle to get investor interest on account of the performance smoothening that may happen. Given the lack of liquidity inherent to this kind of investing, how does the fund price its asset? What are some common worries that your investors may raise on this accounting specific asset?
We use Markit to independently mark all of our OTC positions, which go directly to our Administrator. They effectively use a panel of bank vol pricing to mark our positions, so we have no ability to smooth and are happy with the process.
How do you see digitalization impacting the asset management industry?
The industry still feels ‘clunky’ in terms of the investor experience. Improvements in the management of AML/KYC requirements are likely to assist both investors and managers get on with doing what they need to in a more efficient way.
Where do you see an exciting opportunity to grow?
Asian multi-family offices are our key area of focus, the volume of family office money working its way out of China is quite astonishing. We have a product that cannot be easily replicated, and we believe will knock out strong numbers through a number of market conditions. Having a flat first year means we are not a performance chasers-dream, but for an allocator that understands market structures and resetting of the volatility regime is an opportunity, we are worth a chat.
What are your personal plans for the next 5 – 10 years?
Ideally, our Fund is hard-closed at its cap due to strong performance, and we have a strong, happy team in our two offices (currently Sydney and San Francisco). If not, as long as I have a happy and healthy family, and my two little boys (currently 3 months old and 2 years old) are growing as they should, that’s all I can ask in life.
That’s what matters Gus! Thanks for taking the time to talk with us, and good luck with your goals!
If you want to learn more about Angus, you can reach him directly to his Linkedin Profile here.
We are looking for Fund Managers, Allocators, and Placement Agencies/3rd Party Marketers who are interested in sharing their story with the world and want to get exposure to many eyes in the industry.
If you want to be a part of this, just click here and enter in your details.
We are looking forward to hearing from you!
The Edgefolio Team.