Access to Islamic Hedge Funds - Incisive Media

fund profile
Earnings and cash flow-based
valuations are particularly appropriate
for aluminium companies,
integrated oil/gas companies, pulp
and paper producers and other
processing-based companies. In general,
these analyses focus on valuation
criteria using peak, trough and
normalised commodity prices.
Studying price projections
Van Eck analysts pay particular
attention to commodity price projections.
Supply and demand, inventory
levels and excess capacity
define commodity cycles. Van Eck
believes supply is a critical driver as
it tends to be fixed over the short to
medium term. Other elements in the
price equation are capital spending
and capacity constraints.
Van Eck also believes low excess
capacity or inventory may suggest
higher future prices while
high excess capacity or inventory
could suggest lower future prices.
Product substitution, new technology
and structural changes in
end-user markets can also often put
a floor under commodity prices or a
cap on them.
Analysts also use Wall Street
research, attend conferences, read
relevant trade publications and network
with consultants and others
involved with the industry. This
multiplicity of sources helps provide
a thorough understanding of a
potential investment.
Various types of trades – commodity/equity,
equity/equity and
commodity/commodity – are used
to construct the portfolio. Trades
are monitored for position size, volatility
and liquidity. The degree of
analyst conviction on the position is
also taken into account.
The strategy’s typical portfolio
has 20–30 trades comprising 30–60
positions. For the original hard
assets hedge strategy, typical maximum
net equity exposure is -20%
to +45% while the typical maximum
net commodity exposure is -25% to
+25%.
Maximum gross exposure is
150%. Sector net exposures typically
range from -10% to +10%.
The typical maximum net exposure
ranges from -35% to +35%.
For equity positions, the typical
exposure ranges from -3% to +3%
and the maximum from -5% to
+5%. Commodity exposure is typically
from -5% to +5%. For the 2X
portfolio, exposure ranges are twice
as wide.
In general, the team reviews
strategy performance monthly and
annually. This review helps in setting
entry and exit strategies, spotting
emerging trends and identifying
changes in market sentiment.
Risk management is a high priority
for the investment team. Risk
is monitored at several levels. Position-level
risk is subject to a stopbased
system. Directional trades
and relative value trades have individual
stops. Paired trades have one
stop based on the spread between
the two instruments.
The typical risk of an individual
position is 20–30 basis points with
a maximum of 50 basis points.
Positions are closed when the stop
is reached, when valuation or technical
targets are reached, or when
the trailing stop is triggered.
If the portfolio is down 3% in a
single month (6% for the 2X portfolio),
the manager will neutralise
it. Thus far, this has resulted in a
maximum drawdown of 7.6% since
May 2000.
Note: This material shall not constitute
an offer to sell shares in any
fund. Past performance does not
guarantee future results; current
performance may be lower or higher
than the performance quoted. Van
Eck may change the method used
to evaluate companies and portfolio
methodology used from time to time
and over time. n
Risk management
is a high priority
for the investment
team. Risk is
monitored at
several levels.
Position-level
risk is subject
to a stop-based
system. Directional
trades and relative
value trades have
individual stops.
profile of hard assets hedge strategy investment team
The nine-person investment team
is experienced and stable, with no
departures since 2000. Each member
specialises in a particular sector.
Derek van Eck, portfolio manager,
has over 15 years of investment
management experience and over
10 years with Van Eck. He has been
the portfolio manager of the Hard
Assets hedge strategy since its
inception in 1996 and is responsible
for overseeing its investment
process and risk controls, and the
hiring of analysts on the team.
Van Eck is also a member of the
investment team that manages
the long-only Van Eck Global
Hard Assets Fund and the Van
Eck Worldwide Insurance Trust’s
Worldwide Hard Assets Fund.
Charles Cameron, trader, joined
Van Eck Global in May 1995 as
director of trading and has over 20
years’ experience in international
and financial markets. He oversees
all trade execution for the fund
and, in particular, specialises in
constructing commodity spread
and directional trades. He is also
responsible for macro analysis with
respect to the commodity markets.
From 1989 to 1995 he was a trader
in euro bonds and emerging market
debt for Standard Chartered.
Gregory Krenzer, trader and risk
manager, joined Van Eck Global
in 1994 and has over 10 years of
experience in commodities, natural
resource equities and global fixed
income. He is the risk manager for
the fund and specialises in trade
construction. Prior to this, Krenzer
worked at Merrill Lynch from 1993
to 1994 where he researched
investments for a high net worth
group.
Shawn Reynolds, senior analyst,
joined Van Eck Global in 2005 as
senior analyst focusing on energy.
Prior to joining the company, he
worked at Petrie Parkman & Co as
an energy analyst covering US oil
and gas exploration and production
companies.
Samuel Halpert, senior analyst,
joined the company in 2000 and
covers forest products, tankers,
refiners and alternative energy. Prior
to joining Van Eck, he worked at
Goldman Sachs as an analyst/trader
for a $50 million global macro
hedge fund.
Joseph Foster, senior analyst,
joined Van Eck Global in 1996 as
a precious metals mining analyst.
Since 1998, he has been the
portfolio manager of the company’s
flagship fund, International
Investors Gold Fund. From 1993 to
1996, Foster was a senior geologist
at Pinson Mining Company where
he managed an on-site geology
department and conceived and
implemented a comprehensive
exploration programme on a 35
square-mile land position. He has
over 15 years of experience in
geology and mining.
Charl de M Malan, senior analyst,
joined the company in 2003 as a
precious metals and mining analyst.
Prior to joining Van Eck, he worked
at JPMorgan Chase as an equity
research sales analyst specialising
in South African mining, natural
resources and financial sectors.
Edward Mitby, senior analyst,
joined Van Eck Global in 2008 as
senior energy analyst. His work
focuses on alternative energy,
engineering and construction
and quantitative analyses for
alternative investment strategies.
Prior to joining the company,
he worked at Sailfish Capital
Partners as a senior research
analyst, creating and distributing
multiple long and short strategy
proposals for trading equities,
corporate credit, rates, the ABX and
mortgages.
Geoffrey King, analyst, joined
Van Eck Global in 2007 as an
energy analyst. King’s previous work
focused on the exploration and
production, refining, drilling and
alternative energy markets. Before
joining Van Eck, King was employed
by Merrill Lynch in the energy
investment banking group.
Dedicated industry consultants
are also used to complement the
experience and analysis of the
in-house team.
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