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fund profile
investment team is Daniel Altman,
a metals and mining research specialist
who joined Zweig-DiMenna
in 2007. He has received a number
of accolades for his research in the
sector.
Other investment professionals
on the investment team have an
average of over 15 years working in
the hedge fund industry.
Zweig-DiMenna emphasises
research, trading, risk management
and client service. The company
takes a long-term view of client
relationships. Many of its investors
have been with the company for
over 10 years. Its investor base is
wide including various institutions,
family offices and funds of funds.
Throughout Zweig-DiMenna’s
history, the focus of the company
has always been on returns rather
than asset growth.
Diversified portfolio
The DSAM Kauthar Natural
Resources Fund’s return reflects the
performance of the Zweig-DiMenna
Natural Resources Fund. The portfolio
is diversified holding at least
75 different positions of US and
global stocks across various natural
resources sub-sectors and across a
range of market capitalisation.
The Zweig-DiMenna Natural
Resources Fund invests in the securities
of companies that own or
develop natural resources or energy
alternatives as well as companies
that supply goods and services to
the sector. These include companies
involved directly or indirectly
in exploring, mining, refining,
processing, transporting, fabricating,
dealing in, or owning natural
resources.
Zweig-DiMenna is known as a
manager with extensive investing
experience in natural resources
stocks, using a rigorous, catalystdriven
research approach to stock
selection. Fundamental research
from a global opportunistic perspective
is at the heart of the company’s
success.
The portfolio is constructed from
the bottom up and decision-making
is centralised. Ideas come from
both the portfolio managers and
the analysts. The team looks at a
broad universe of stocks, and makes
its selections based on in-depth
research.
Modelling stocks
Zweig-DiMenna’s research approach
includes constructing detailed financial
models of stocks in the energy,
basic materials and related sectors.
Investment professionals meet with
the management of the companies
and visit facilities worldwide. Analysts
also meet with competitors,
vendors and end-users in the course
of their research on a company.
Detailed analysis of supply-anddemand
trends in natural resources
in developed and emerging markets
is another element of its expertise in
the sector. In addition, the team uses
cutting-edge technology to assist the
research process.
The research team concentrates
on identifying specific catalysts for
change in a stock price, including
earnings surprises, product cycle
changes, technological innovation
and regulatory changes. Shifts
in supply and demand, driven by
changing industrial and economic
conditions, are an important factor
in the investment decisions. Changes
in commodity price expectations are
another important consideration.
Other factors include restructuring
and corporate events, as well as
more esoteric concepts, like changes
in investor psychology.
On the short side, the investment
team looks for companies where
there are fundamentally flawed business
models, poor earnings quality,
the inability to generate sufficient
cash flow, aggressive accounting,
and mis-pricing based on assumptions
about the underlying commodity
prices. The portfolio always
includes short positions, which are
seen as profit centres.
Catalysts for change are monitored
continuously. Earnings and
price targets are identified and frequently
revised. The time horizon on
stocks is typically six to 12 months.
The average individual stock position
size is in the 1%–2% range
and there are generally only a few
over 4%. The portfolio is diversified
across a substantial number of
individual positions for portfolio
flexibility.
Exposure in Zweig-DiMenna’s
natural resources sector strategy has
averaged about 75% net long and
95% gross long in recent years, but
currently is much lower. The gross
and net investment exposures vary,
driven by a combination of opportunities
and market conditions.
Risk management is important
to Zweig-DiMenna. The company
takes a two-pronged approach.
First, the company has a risk manager
who provides the portfolio
managers with analyses including
gross, net and beta portfolio exposures,
as well as the concentration,
correlation and beta of sector exposures.
The beta of the individual positions
is also carefully monitored, as
is the liquidity of the positions. Positions
are evaluated on an ongoing
risk/reward basis and the viability
of the catalysts that have been identified
is carefully scrutinised.
Geographic exposures are also
carefully monitored. A variety of
other risk management tools are
used including BARRA analysis.
Second, macro-economic risk
management focuses on interest rate
trends, inflation, investor liquidity,
global supply and demand, geopolitical
risks and industry and
market trends. n
fundamentals of dsam kauthar natural resources fund
Zweig-DiMenna’s
research
approach includes
constructing
detailed financial
models of stocks
in the energy, basic
materials and
related sectors.
Investment
professionals
meet with the
management of the
companies and visit
facilities worldwide.
Analysts also meet
with competitors,
vendors and endusers
in the course
of their research on
a company.
Name of fund:
DSAM Kauthar Natural Resources Fund
Management company: Zweig-DiMenna International Managers
Portfolio managers:
Joseph DiMenna and Thomas Keyes
Contact:
Mohammad Jamjoum, general manager, Dubai Shariah Asset Management, Dubai
Multi Commodities Centre, Al Mas Tower, 50th Floor, Jumeirah Lakes Towers, Dubai,
United Arab Emirates (+971-4-375-2227; mjamjoum@shariahcap.com)
Domicile:
Cayman Islands
Asset manager:
Dubai Shariah Asset Management (DSAM)
Fund summary:
Invests exclusively in units of the Zweig-DiMenna Natural Resources Fund, a subtrust
of the Al Safi Trust Platform and is managed by Zweig-DiMenna International
Managers. The fund’s return reflects the performance of the Zweig-DiMenna Natural
Resources Fund account at Barclays Capital. It invests primarily in long/short equity
securities with stock selection based on a fundamental bottom-up analysis. The
portfolio is generally diversified with at least 75 different stock positions and includes
US and foreign stocks of natural resources sub-sectors with a range of market cap.
The fund may invest in the securities of companies principally engaged in owning or
developing natural resources (or their alternatives), or supplying goods and services
to these companies, including entities involved directly or through subsidiaries in
exploring, mining, refining, processing, transporting, fabricating, dealing in or owning
natural resources.
Asset manager fee: 1%
www.hedgefundsreview.com November 2008 | Access to Islamic Hedge Funds Supplement | 23