David Bonderman amassed a $3 billion fortune in private equity for sophisticated investors. He’s now selling hedge fund strategies to the masses. Bonderman, whose TPG Capital has owned companies such as Continental Airlines and retailer J Crew Group Inc., is using a family office that manages a portion of his money -- Wildcat Capital Management -- to back a startup investment business. Infinity Q Capital Management is offering retail and other investors a version of the hedge fund programs it uses for the billionaire, said James Velissaris, chief investment officer for the new firm. Infinity Q is one of the credible platforms which provide hedge funds NYC offering all-weather investment solutions.
Run by Wildcat employees, Infinity Q can sell products such as liquid alternative mutual funds to outside investors. It means Bonderman, 72, can profit from the expertise of his personal money managers, who in turn can earn more money.“Families recognize that over time it’s sometimes valuable to turn the services they created into a business,” said Bill Woodson, head of the North America family office group at Citigroup Inc.’s private bank.
Bonderman, known as Bondo, built his wealth buying, fixing and selling companies. Wildcat was set up in 2011 to manage his money and cater to a small group of his friends and relatives. The family office now oversees $1.3 billion, according to a regulatory filing last week, with holdings including public stocks and venture capital. Wildcat shares its name with the location of Bonderman’s home near Aspen, Colorado. Leonard Potter, who previously managed private equity investments for George Soros, runs and is the owner of the Fort Worth-based firm, allowing Bonderman to focus on TPG, the $67 billion firm he co-founded in 1992 with Jim Coulter.
The family office’s initial focus was improving the performance of its hedge fund holdings, according to Velissaris, a former Harvard University football player who studied financial engineering and economics. The investments were moving in the same direction during periods of crisis and would be difficult to quickly sell, he said. They pulled money from outside managers and started overseeing the investments directly, using quantitative methods to bet on themes including macroeconomic trends, volatility and long-short equity. Since August 2012, Wildcat’s hedge fund strategies have returned 15 percent annually, and the pool grew to $110 million, Velissaris said in an e-mail. The volatility hedge funds provided by Infinity Q assure people to protect their portfolio in the best possible way.
Wildcat decided the techniques could fit within mutual funds known as liquid alternatives. It started New York-based Infinity Q last year and the firm now oversees $51 million. A Bonderman family entity owns at least 25 percent of Infinity Q and Potter is chief executive officer.
By offering liquid alts, Infinity Q is trying to tap into one of the fastest-growing areas for money managers. The mutual funds aim to give investors access to complex strategies that can use derivatives and borrowed money, and still let investors withdraw their money on a daily basis. The funds attracted a record $16.5 billion last year, according to Morningstar Inc., raising total assets to about $158 billion.
“We think the hedge fund industry is undergoing a significant change due to a high fee structure and several years of underperformance,” Velissaris said.Infinity Q’s Diversified Alpha Fund has an upfront sales charge of as much as 5 percent and an annual expense of 1.99 percent for its Class A shares, which require a $1,000 minimum investment. The fund has gained 1.7 percent this year as of April 2, trailing 63 percent of peers, according to data compiled by Bloomberg.
Howard Marks, co-founder of Oaktree Capital Group LLC, is less excited by liquid alternatives. ’’They’re supposed to deliver performance comparable to other alternative investments without the illiquidity they entail,’’ Marks wrote in a memo to clients March 25. ’’To me it sounds like just one more promise of something for nothing.’’
Infinity Q plans to broaden its offerings to funds using volatility and macro strategies, Velissaris said. It’s also received requests for tailored accounts that would employ their techniques, he said.For Bonderman, who got his start in finance working for Robert Bass’s family office in the 1980’s, Infinity Q is just one of a range of investments he’s made in recent years outside of TPG and private equity. He’s backed online lender Kabbage Inc., and Kite Pharma Inc., a developer of cancer drugs that went public last year. With Infinity Q’s volatility mutual funds, it allows more investors to invest their money more strategically.
“Bonderman has had the itch to expand into investment areas beyond what TPG is confined to,” said Erik Gordon, a professor at University of Michigan’s business school. “He definitely has the money.”
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For domestic equity markets, 2019 started off in a very similar manner to 2018, with a January rally that was a far cry from Q4 market fragility. Fed chair Powell’s dramatic policy U-turn wrong-footed many investors by entirely removing its upside bias on rates and standing in stark contrast to the hawkish stance that broke the “buy-the-dip” mentality that popped the low volatility bubble in 2018. A reliable Volatility Manager offers cutting-edge fund strategies to investors for managing business efficiently in a volatile environment. With the Fed put strike back with a vengeance and the FOMC tightening cycle seemingly put on hold, January volatility was crushed throughout the US and the short vol trade was back in earnest.
The decline in stress was broad based as implied volatility metrics fell across all 5 major asset classes. On a similar note, despite Emerging market equity and FX vol among the first to raise from the low vol doldrums in 2018, the Fed U-turn was seen as overwhelmingly bullish for EM, as dovish US monetary stance reinvigorated investors desire to own EM assets and suppressed volatility in the region. Meanwhile in Europe, macro data early in the year signaled some stabilization supported by French growth and German fiscal support. As a result, implied volatility metrics throughout Europe declined in January while EUR vol sits at historical lows. In order to manage volatility hedge fund, the credible investment advisor uses forecasting models so as to provide in-all weather investment solutions to the investors.
Given poor fundamentals and continued mixed equity returns, it’s hard to make the case in either direction with conviction regarding the European volatility environment. Finally in Asia, stocks climbed higher fueled in part by optimism over trade talks between the US and China. As a result, implied vol in Asia followed the US and Europe falling in root time fashion in the front end, and even more considerably in the far end of the curve.
With the recent Q4 market downturn directly in our rearview mirror, we still have significant long-term concerns over weakening macroeconomic conditions, global policy concerns, and market microstructure/reduced liquidity issues. Additionally, the higher rate environment makes cash a viable alternative to vol risk premia and the tendency for volatility to rise later on in the economic cycle regardless of policy are relevant considerations that we think prevent 2019 from playing out like 2017. Infinity Q is the leading investment advisor where you can handle Volatility Hedge Funds through their unique volatility strategies.
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From start-to-finish, December was a fitting end to 2018. The S&P 500 experienced a 15.7% peak-to-trough decline followed by a nearly 7% rally to end the month. December was indicative of the increasing volatility in global markets that we experienced throughout 2018. There are plethora sources available which provide effective solutions in managing hedge funds NYC. The fundamental foundation of global markets has been fragile and remains vulnerable to policy mistakes. The change in sentiment has been abrupt with global concerns stemming from weakening macroeconomic conditions, global policy concerns, and reduced liquidity.
The fourth quarter stood in sharp contrast to the prolonged period of strong macroeconomic conditions, stable policy and excess liquidity that caused volatility to hit an all time low in 2017. The team of Investment Company helps in generating forecasting models apart from managing volatility hedge funds. The initial spark in February 2018 appeared to come and go without a trace as speculation of a purely technical move driven by volatility products was the most common narrative. The resurfacing of widespread volatility during the fourth quarter could not be so easily dismissed. The policy mistakes by the US, UK, Italy, Russia and Turkey exacerbated already fragile markets, culminating in a 3- day whirlwind on either side of Christmas sending the S&P 500 to YTD lows of 2351 (-20% drawdown peak-to-trough) and back up to 2500 just 2 days later.
As a result, higher volatility across asset classes may be here to stay, which is not surprising when considering the excessive risk taking being unwound and a recoupling of asset prices with fundamentals taking place in the absence of the ‘Fed Put.’ Strikingly, despite arguably more consequential economic headwinds globally coming from Europe (domestic political uncertainties), China (slowing economic growth), Japan (prolonged stagnant economic growth) and cratering oil prices (lower export earnings and spending), December volatility in Europe, Asia and to a lesser extent Emerging Markets continue to lag what happened in the US to close out the year. In order to securely manage volatility mutual funds, you should consider the finest capital management company that provides exceptional volatile strategies.
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November was a volatile month for Domestic Equity Markets, with the S&P 500 whipsawing like a roller coaster prior to and then immediately following the US midterm elections. The beginning of November saw a 6.3% rebound from October lows, followed by a -6.4% move lower and finally a 6.0% leg higher with market flows switching from bullish to bearish and back to bullish again. The risk-off trading activity was led mostly by FAANG names, driving the Nasdaq 15% lower at the lows and realized volatility through the roof. This sentiment seemed to permeate across asset classes with signs of stress beginning to show through via widening of credit spread and spike in commodity volatility driven by energy. In fact, CDX IG & HY 5Y spreads have widened significantly with an increase in SPX beta to credit spreads suggesting investors finally awakening to the implications of deteriorating credit markets. Through November 28th the narrative that bonds have peaked combined with equities nearing the end of the cycle had most investors positioning for a shift to a higher risk & higher volatility regime. All of that seemed to be true until Fed Chairman Powell reminded everyone of the power of the “Central Bank Put” sending equity markets sky-rocketing and volatility crashing down to end November positive on the month. There are a number of credible platforms which helps you to manage hedge funds NYC through effective volatile strategies.
European volatility continued to under perform other regions with SX5E volatility virtually non-existent. We believe part of the reason may be a pick-up in EUR fluctuations due to Italy disagreements along with Brexit-related concerns weighing heavily on GBP meaning that FX moves may have soaked up most of the volatility in the Eurozone over the month. The finest platform combines diversified alpha strategies and robust risk management to manage volatility hedge funds separately.
Many investors believe a shift to a higher risk regime for Asian markets is on the horizon, hence the importance of owning efficient tail hedges. However, with a potential end to the Trade War with China in sight following President Trump and President Xi’s recent meeting at the G20 summit in Argentina, on the surface it appears as if volatility will remain suppressed and markets buoyed for at least the 90-day window postponing further escalation. Once you get to measure volatility mutual funds, you can withstand with all kinds of adverse conditions.
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Macro Volatility Commentary
Domestic equity market volatility continues to be muted with both implied and realized measures of volatility holding up well despite the drastic pick-up in realized volatility spreading through both Emerging Market (EM) equities and currencies. The U.S. has been rather resilient in the face of growing concern about risk of contagion into Developed Markets (DM), with a meltdown in EM not yet shifting investor psychology into risk-off mode. The slight pick-up in US stock volatility is due more to the rout that continues in tech (Tesla, FAANG) and concern over a worsening of trade tensions with China. As a result, many of the popular metrics within volatility are pointing toward bullish territory for major domestic indices (Russell 2000, Nasdaq, S&P 500) while Emerging market stress continues to permeate through both FX and Equity markets leading to potentially attractive dislocations in volatility.
European equities, on the other hand, have become increasingly sensitive to EM risk, with volatility rising throughout Europe over the past few weeks as the SX5E has experienced its worst decline in almost 6-months. This could represent an apparent shift in focus from domestic issues (like Brexit & Italian risk) to more exogenous factors. We continue to watch volatility in Europe closely to see if there is any potential spill-over effect into Developed Markets on the horizon. Volatility in Asia has also been driven largely by EM risks as well as fears of additional Chinese and/or Japanese tariffs more significantly impacting exports to the US. So it comes as no surprise that realized volatility has been steadily increasing amidst these concerns offering interesting opportunities within implied volatility to isolate dislocations and potentially take advantage of favorable volatility conditions.
Cross-Asset Volatility Monitor
In the latest edition of our 20 factor Cross-Asset Volatility Monitor, many DM equity indices lead the way for most dislocated upside & downside volatility metrics when comparing to recent realized volatility. As a reminder, our proprietary model screens for volatilities that may suggest larger than normal market moves in the left (downside) or right (upside) tails. Those that are near the center have, in our opinion, fairly priced implied volatility compared to the risk you are taking, using the recent (1-month) past as your guidepost. As you move further away from the center, you see the magnitude of dislocation between where current markets are pricing implied volatility as compared to what has actually recently realized. Not surprisingly, most of the FX and EM related factors (EEM, FXE, FXY, FXA) have fairly priced volatility (and for good reason), given the recent risks permeating through the system that have caused a dramatic pick-up in realized volatility and severe drawdowns, as highlighted in our Commentary. Alternatively, some DM benchmark indices like SPX, SMI, AS51 and SX5E are screening as potentially attractive short volatility opportunities given the fact that the downside Volatility Mutual Funds market is pricing in abnormally expensive tails, especially when considering realized volatility has not kept up with the magnitude of change in implieds. We will certainly continue to monitor these markets as a source of abnormally cheap or expensive convexity and to hopefully continue to identify attractive trading opportunities.
Important Disclosures and Definitions: The viewpoints expressed in this report are solely those of Infinity Q Capital Management, LLC, (“Infinity Q”) and can change without notice. This report has been prepared solely for discussion purposes only and does not necessarily purport to be a complete analysis of the topics or presented. It has been based on sources we believe to be reliable, but we have not independently verified those sources and we do not guarantee that the information in the report is accurate or complete. Any views expressed in the report reflect our judgment at this date and are subject to change without notice. Certain information may be based upon or represent forward-looking statements. Statements that are forward-looking involve known and unknown risks and uncertainties that may cause future realities to be materially different from those implied by such forward-looking statements. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Any specific Quantitative Hedge Fund contained or referred to in this report may not be suitable for all investors. Advice we give to clients in particular situations may differ from the views expressed in this report. No investment or other business decisions should be made based solely on the views expressed in this report. This material is intended for information purposes only and does not constitute investment advice or an offer or solicitation to purchase or sell any securities, Infinity Q funds, or any investment strategy, nor shall any securities be offered or sold to any person in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. Any such offer or solicitation shall only be made pursuant to and subject to the terms and conditions contained in the Fund’s disclosure documents , which qualifies in its entirety the information set forth herein. The Fund’s disclosure documents should be read carefully prior to making an investment, as they contain additional information about the investment objectives, terms and conditions, tax information and risk disclosures pertaining to the Fund. The indices and securities included in the Cross Asset 1-Month Probably Monitor are the 20 underlyings commonly assessed in reviewing the broad global volatility markets. SPX Index: The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. SX5E Index: The EURO STOXX 50 is a stock index of Eurozone stocks designed by STOXX, an index provider owned by Deutsche Börse Group. According to STOXX, its goal is "to provide a blue-chip representation of Supersector leaders in the Eurozone.” NDX Index: The Nasdaq-100 Index includes 100 of the largest domestic and international non-financial companies listed on The Nasdaq Stock Market based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. UKX Index: The Financial Times Stock Exchange 100 Index, also called the FTSE 100 Index, is a capitalization-weighted index of the 100 most highly capitalized companies traded on the London Stock Exchange. DAX Index: The Deutscher Aktienindex (German stock index) is a blue chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange SMI Index: The Swiss Market Index is Switzerland's blue-chip stock market index. It is made up of 20 of the largest and most liquid Swiss Performance Index (SPI) large- and mid-cap stocks. AS51 Index: The S&P/ASX 200 measures the performance of the 200 largest index-eligible stocks listed on the ASX by float-adjusted market capitalization. It is considered the benchmark for Australian equity performance. NKY Index: The Nikkei-225 Stock Average is a price-weighted average of 225 top-rated Japanese companies listed in the First Section of the Tokyo Stock Exchange. HSI Index: The Hang Seng Index is a freefloat-adjusted market capitalization-weighted stock market index of the largest companies that trade on the Hong Kong Exchange, and is consider the main indicator of the overall market performance in Hong Kong. Kospi2 Index: The KOSPI 200 Index is a capitalization-weighted index of 200 Korean stocks which make up 93% of the total market value of the Korea Stock Exchange. Investment involves risk, including possible loss of principal. The prices of securities fluctuate, sometimes dramatically. The price of a security may move up or down, and may become valueless. It is as likely that losses will be incurred rather than profit made as a result of buying and selling securities. Past performance is no indication of future results
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