Former Balyasny Analyst's Quant Hedge Fund to Ride Volatilityby
Limnah Capital will use 10 strategies in 150 liquid markets
Fund to start with $20 million in Singapore in second quarter
Former Balyasny Asset Management analyst Avirath Kakkar is starting a hedge fund that will use computer-driven trading models to take advantage of rising volatility across markets.
The Limnah Capital Fund, managed from Singapore, will start with $20 million in the second quarter and use about 10 so-called systematic macro trading strategies in 150 liquid markets, including agricultural commodities, currencies and equities, Kakkar, co-chief executive officer of the firm, said in an interview. To reduce risk, the fund will keep the allocation to each market small, he added.
Quantitative strategies emerged as a bright spot in 2015, a tumultuous year for hedge funds that saw returns from high-profile managers such as John Paulson, Ray Dalio and Bill Ackman disappoint. Quant funds had the highest inflows in at least four years last year after experiencing the best performance among all hedge fund strategies in 2014, according to Mohammad Hassan, a senior analyst at Singapore-based data provider Eurekahedge Pte. Investors continued to favor the strategy, with $4.4 billion of inflows in the first quarter, Hassan said.
“Quantitative easing isn’t going to work any more and assets will see a repricing,” Kakkar said. “Things will move fast, and that’s where funds using a systematic strategy come in to spot those opportunities.”
Return of Volatility
Limnah is betting that computer-driven models can capitalize on volatile periods as markets become more driven by fundamentals rather than central-bank liquidity. Quantitative strategies, which often follow the up or down momentum of particular securities, posted modest returns or losses from 2010 through 2013 as central banks injected liquidity through quantitative easing and bonds, stocks and commodities moved in sync amid low volatility. With oil prices plummeting and uncertainty over the U.S. Federal Reserve’s monetary policy, quant funds are outperforming fundamental stock pickers.
The Chicago Board Options Exchange Volatility Index rose to the highest in five months in February and a gauge of oil-price volatility climbed to the highest in at least six years in the same month.
Before joining the Hong Kong office of hedge fund firm Balyasny, the Chicago-based multistrategy firm led by Dmitry Balyasny, in 2014, Kakkar worked with Standard Bank Singapore and JPMorgan Chase & Co. He runs Limnah with Michael Annerl, who previously worked as director of oil trading at Citigroup Inc. and as executive director commodity structuring and sales for Goldman Sachs Group Inc., both in Singapore.