Algometrics' global fund was soft-launched early in 2001, but market conditions were not conducive to obtaining good returns. “We trade cash, exchange-traded and over-the-counter options, and made the decision at the start of 2002 to shift the emphasis towards becoming a liquidity provider,” said Stephen Smith, managing director of Algometrics.
The hedge fund is seeking the further investment from institutional investors, funds-of-funds and ultra-high-net-worth individuals. Smith declined to comment explicitly on the fund’s returns, but said performance has been relatively good.
Algometrics claims to have an edge in market-making because of its expertise in modelling short-term price and volatility behaviour, said Smith. “Most of us here have a background in statistical arbitrage," he said. "Having proprietary short-term price forecasting allows us to obtain a weak price determinism - giving us an advantage.”
Meanwhile, Algometrics is hoping to launch a credit fund by the end of 2002, Smith said. The fund will follow a credit arbitrage strategy, with 40% of its allocation in credit derivatives. “It’s unlikely we will launch with less than $100 million of capital," he added. "This will give us a book size of around $1 billion."