Lynx Fund: Lynx Asset Management (Brummer & Partners)

Shortlist: Best managed futures hedge fund

The European Perfomance Awards 2011

Lynx has shown good performance since inception in 2000. The return is 15.8% annualised after fees.

In common with other managed futures funds, Lynx performs well in times of market turbulence and weak stockmarket performance. This is an appealing concept now as well as for future investors, according to the portfolio managers of the fund. Their goal is for Lynx in the longer term to generate an average annual return of 15%-20%.

The Lynx program is managed with the aid of statistical models. The models facilitate quantitative analysis of price movements and invest when there is a higher probability of future price movements being in a particular direction.

The allocation of risk between the markets in which the Lynx program invests is constantly changing, depending on the investment opportunities on offer. Over a longer-term perspective the average allocation of risk is approximately fixed income 26%, currencies 28%, equities and equity indexes 24% and commodities 22%.

The portfolio managers use four main types of model in which the time horizon and approaches of the models complement each other. Trend-following models account for the greater part of the risk exposure.

These models identify trends on financial markets and invest in the direction of the trend.

Contrarian models attempt to identify short-term reversals in the trend. In forecasting future price developments, inter-market models factor in variables other than just price changes in the primary market. Short-term models identify trends that exhibit durations of a few hours to a couple of days.

The trend following models account for most of the Lynx program’s risk exposure. However, the proportion is lower than what is common among many other managed futures funds.

As the fund also allocates risk to other types of models, a more stable portfolio can be constructed. The aim is that the portfolio as a whole should displays smaller drawdowns when the markets display no clear trends.

The quantitative management concept facilitates comprehensive analysis work. The managers believe the functioning of the markets changes over time. Continuous development of new models is an important aspect of the activities within Lynx.

The portfolio managers are Jonas Bengtsson, Svante Bergström and Martin Sandquist. Bergström is the company’s CEO as well as a portfolio manager for Lynx. He has the main responsibility for portfolio construction and risk allocation. Sandquist has developed many of the models used in its management.

Bengtsson, Sandquist and Bergström have managed the Lynx program since its inception. All three previously worked at Nordbanken, now part of the Nordic financial services group Nordea.

Over 1996-98 Lynx formed the proprietary trading unit within the Scandinavian bank Nordea. Founded in 1999, Lynx Asset Management is jointly owned by the three portfolio managers and Brummer & Partners, Scandinavia’s leading hedge fund company.

The company has around 30 employees involved in model development, the execution of transactions, programming and support. The business is largely based on statistical models. This means the organisation and working practices differ significantly from most asset management organisations.

In February 2011, Deutsche Bank and Lynx Asset Management launched the DB Platinum IV Lynx Index, a Ucits-compliant version of the managed futures Lynx Fund. The Ucits fund is managed by Bengtsson, Bergström and Sandquist and follows the systematic strategy applied by the Lynx fund.

The Ucits product reflects the Lynx program adapted to Ucits rules and will reflect the performance of the systematic investment in the global futures and forwards markets. Investors should be drawn to the Ucits product as its swap structure means it should have no tracking error compared with the Lynx program which it mimics, according to the portfolio managers. The Ucits product offers daily liquidity and has a management fee of 0.05%. It has two institutional share classes in euros and US dollars.

Fund facts
Full name of fund: Lynx Fund
Name of portfolio managers: Svante Bergström, Jonas Bengtsson and Martin Sandquist
Name of investment/management company: Lynx Asset Management (Brummer & Partners)
Contact information: Svante Bergström, Box 7060, SE-103 86 Stockholm, Sweden (postal address); Norrmalmstorg 12, SE-103 86 Stockholm, Sweden (visiting address) (+46 8 663 33 60; +46 8 663 33 28 (fax); info@lynxhedge.se; www.lynxhedge.se)
Launch date: May 2000
Assets under management: $4.491 billion (at April 30, 2011)
Net cumulative performance since inception: 15.8% annualised after fees; total return 378.2%
Annualised return: 15.52%
Annualised volatility: 14.33%
Sharpe ratio: 0.90
Strategy: global managed futures/CTA
Share classes: Swedish krona
Administrator: B & P Fund Services
Auditor: KPMG and SN:s Revisorer
Custodian: SEB
Legal counsel: Appleby
Domicile: Sweden and Bermuda
Management fee: 1%
Performance fee: 20% over hurdle rate (high water mark)
Minimum investment: Skr500,000
Lock-in: none
Redemption/liquidity terms: monthly with three banking days’ notice

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