Benedicte Gravrand, Opalesque Geneva for New Managers:
Here is a rare Polish hedge fund which combines multi-strategy and global macro approaches and outperforms its peers thanks to original tactics.
Macromoney, a fund manager focused on concentrated investments in securities, futures and options listed on the main stock exchanges, is a BVI-based firm founded in 2012 with fund administration in London, prime broker services in New York, and operational offices in Warsaw, Poland.
Macromoney’s founder is Maciej Wisniewski, an investment professional with 20 years of experience. He also founded in 2005 Investors Investment Fund Company ("Investors TFI"), one of Poland's first privately owned investment fund management companies, and grew assets in six years from $3.5m to $700m. Most of the closed-end funds are listed on the Warsaw Stock Exchange. Previously, he was Director of Trading at BZ WBK AIB Asset Management and Proprietary Trader for LG Bank, after beginning his career as a stockbroker at Raiffeisen Capital and Bank Millenium Securities. He claims to have established one of the first Polish hedge funds (2005), the first gold fund in Poland (2006) and the first private equity fund in Poland for private investors (2007).
The fund, Macromoney Global Investments Ltd., combines a multi-strategy and a global macro approach. Its investment process is twofold; a quantitative approach to analyse long-term sets of macroeconomic data, and an exploration of these macroeconomic trends through a bottom-up approach. Incepted in January 2013, the fund returned 34.6% last year and is up 22.6% YTD (to August). It fee structure is 1% and 10%. The HFRI Multi-Strategy Index is up 3% YTD and the HFRI Macro (Total) Index 2.4%.
"We have a long-term approach when we look at the supply side of the economy," Wisniewski explains. "Experts agree that economies grow in the long-term thanks to three main forces: labour, capital accumulation and total factor production (TFP= technological progress, R&D, human capital accumulation). If we look at the emerging economies’ main growth factor, we realize that it is the capital accumulation that helps them to develop untill they reach a steady state. The first decade of 21st century is an example of outperformance of emerging economies driven by consistent infrastructure investments. Instead, developed economies’ main growth factor is the total factor production, because having already reached their steady state, they can only develop further through research and innovation. The last decade of 20th century is an example of outperformance of developed economies driven by computing, PC software, internet development, supply management and on time delivery."
He believes that we are at the next stage of technological progress and innovation, which is driving developed economies’ outperformance this decade. Examples are found in mobile computing, mobile apps, cloud computing, big data, 3D printing, and robotics/drones, he notes. So the fund is staying focused on technology stocks and developed markets, "which, after a period of deleveraging, are reversing their decade-long of underperformance."
PROPRIETARY MACROECONOMIC MODEL BASED ON MOMENTUM SIGNALS
The managers also look at business cycles and use an in-house built proprietary macroeconomic model based on momentum signals to do so.
"Economies move up and down and each stage of the economy cycle corresponds to a different outperforming asset class," he says. "We interpret these economic cycle changes thanks to a proprietary macroeconomic model ... Usually a standard momentum strategy is based on the prices of the different asset classes. Instead our model gives us signals that are based on momentum of macroeconomic indicators. Thanks to these signals we are able to allocate funds among different asset classes. To make it easy, our model tries to figure out whether in the near future there will be a slowdown in economic data or even worst, if there will be a recession. Following this example (recession), we would change the asset class into which the fund invests, and move for example from stocks to cash or safe treasury bonds."
The model was tested on different markets and the signals allowed it to outperformed related benchmarks. Relying on a macroeconomic model based on momentum signals is more objective than a standard momentum strategy, which is based on the asset classes’ prices and can be influenced by market players, Wisniewski adds. He expects more fluctuations of business cycles in the foreseeable future, and the model will help him interpret them.
MINING THE INTERNET COMMUNITY
In the fund’s investment strategy, the manager believes the best potential for long-term capital appreciation is through equities investing and it is important to look at things from different perspectives; he does do not only follow research from investment banks but also from the Internet community of independent investors, strategists and industry players. Research published last year in the Wall Street Journal lends credibility to the idea that the "wisdom of crowds" phenomenon applies not just to encyclopaedia entries and restaurant reviews, but also to stock market predictions, he notes.
When asked about the pros and cons of internet analysis, Wisniewski says: "Internet analysts seem to be more independent and free thinkers due to their non-strict relationship with the companies that they try to analyse, not to mention their different backgrounds and geographical locations. These analysts are also sometimes able to dig more into the companies they study because they can come from that particular industry or sometimes even that company. For example, an engineer working for a Chinese real estate company could potentially give better insights on this kind of company than an analyst sitting in an office
located on the other side of the world. There is also the risk that the financial data (e.g. balance sheet, cash flow statement, income statement, etc.) are not of a good quality. So to address this issue, we use well-known financial data providers when we analyse raw financial data.
"Of course, we review their audited annual reports because this is the place where you have got all the company information; you can’t be biased. Moreover, we do not follow one idea without testing it against many other researches on the same subject and even against the comments expressed at the end of the research by other analysts."
"The bottom line," he continues, "is that you can have hundreds of people "working for you," creating a big and creative investment committee that would be hard to replicate in-house."
NEW FEEDER FUND
In 2012, Wisniewski sold his stake in Investors TFI to the other partners in order to start his own hedge fund. He had agreed to an anti-competitive close and was finally able to start the marketing campaign of the fund in late spring this year. The fund is now present in several hedge funds databases.
Macromoney decided to launch a feeder fund in Poland that would invest 100% in the hedge fund, the master fund, to accelerate the growth of the AuM.
"In October 2014, we are going to make the first issue of the feeder fund in Poland, under the Polish Securities and Exchange Commission (KNF)," he adds. "Polish institutional and HNWI clients are not familiar with offshore strategies so we preferred to create and accommodate this master/feeder structure to them."