First Quadrant can't get enough of hedge funds, even as dozens of other hedge fund operators have been rushing for the exits.
The Pasadena, Calif.-based money manager is planning to roll out a hedge fund that will combine its domestic and international market-neutral and long-short strategies into an in-house fund of funds, said Robert D. Arnott, president and chief executive officer.
The Premier Fund, as the new fund will be called, will combine the firm's global futures, global currencies and global tactical options long-short strategies, as well as its international and domestic market-neutral strategies, using an optimizer to reduce risk, he said.
Mr. Arnott hopes the new fund, which will use leverage, will top off at around $1 billion.
"We have a number of market-neutral and long-short programs with essentially zero correlation between strategies," he said.
By combining the uncorrelated strategies and using an optimizer, the fund should be able to maximize alpha -- or excess returns -- per unit of tracking erorr.
Moreover, because of the Premier fund's lack of correlation with the stock market, it should be appealing to those investors who are looking to minimize their downside risk if the stock market should tank.
At the same time, the fund also could appeal to those who are looking for upside potential. Simulated tests of the fund show it could produce returns in the vicinity of 20%, with volatility of 14%, Mr. Arnott said.
The fund will be sold in units of $1 million and more to institutional investors and high-net-worth individuals.
"This is where my spare money is going," Mr. Arnott said.