SAINT JOHN, New Brunswick -- The Workplace Health, Safety and Compensation Commission of New Brunswick, Canada, allocated C$14 million (U.S.$10 million) to a structured note with returns tied to managed futures, said Warren Gerow, consultant to the C$600 million (U.S.$426 million) insurance fund.
The note pays a 2% coupon with principal guaranteed by Toronto Dominion Bank.
Trilogy Capital Management LLC, Princeton, N.J., already a manager for a similar C$50 million structured note, will manage the futures portfolio for this note, Mr. Gerow said.
ABN AMRO is the broker for futures trades and will help monitor Trilogy's portfolios, he said.
With the new note, the commission will have about C$70 million in futures-linked investments, although the bulk of that technically is classified as fixed income.
Gerow joins Trilogy as Canadian marketer
PRINCETON, N.J. -- Separately, Mr. Gerow will be working as a marketer to Canadian pension funds for Trilogy Capital Management, Princeton, N.J.
He was manager-treasury and investments for the Workplace Health, Safety and Compensation Commission, and continues to work as a consultant to the commission.
Mr. Gerow said it has yet to be determined whether he will work as an independent contractor for or employee of Trilogy.
Mr. Gerow will continue to act as a consultant for the New Brunswick commission until a replacement can be found, he said.
He said the parting with the commission was amicable.
An effort to replace him is set to begin.
U.S. firms to manage Japanese funds
Two U.S. futures firms were selected to manage Japanese futures funds. Parker Global Strategies LLC, Stamford, Conn., will manage a $366 million Japanese retail fund, while Sakura Dellsher Inc., Chicago, will manage the $13 million in active assets for a $67 million principal-guaranteed fund.
Parker's fund, called Protection II, is comprised 75% of hedge fund managers and 25% futures managers. The fund will pay a 2% dividend and offers a guarantee of principal at maturity, three years hence.
Virginia Reynolds Parker, president, said managers have been selected for both components, but their names aren't being released until all contracts are signed. Dean Witter Futures and Currency Management Inc. will select managers for the futures component of the fund.
Ms. Parker said her firm is considering a U.S. version of the fund, which would target institutions and high-net-worth investors.
She said creating a principal guarantee on hedge funds proved to be challenging. Unlike futures or currencies funds, hedge funds aren't readily guaranteed.
Currencies and futures are leveraged enough that the cash not used for actual exposure can be used to purchase zero-coupon securities that effectively guarantee the principal at maturity.
That's not the case with hedge fund managers.
Instead, Parker will use stop losses set to trigger if fund values fall below the amount needed to buy principal guaranteeing zero-coupon securities. The stop-loss level will vary with interest rates and other market variables, and therefore will be monitored daily.
Parker Global also will act as risk manager for the fund, monitoring the individual risks among managers, and of risk on an aggregate portfolio basis.
Sakura Dellsher's affiliate, Sakura Bank, will offer a guaranteed principal, yen-denominated fund to retail investors in Japan.
Sakura Dellsher, primarily a futures broker, is expanding its work in futures management, and hired Ranga Nathan as senior vice president of global risk management.