25/01/2012 Author: Will Wainewright

36 South volatility fund returns 101% for the year

A volatility fund run by 36 South Capital Advisors, a hedge fund manager now based in London after launching in New Zealand a decade ago, recorded performance gains of more than 100% last year.

The Black Orlov fund, a managed account worth tens of millions of dollars run for a single client, returned a stellar 101% during 2011, although overall returns since its launch in June 2010 amount to a more moderate 43%.

Such eye-catching returns are not new territory for the firm, whose assets currently stand at almost $500m. Its Black Swan Fund was closed after recording a 234% gain during the economic tumult of 2008.

The fund manager traded from New Zealand for eight years before moving to London in 2009, at which point AuM stood at a lowly $30m. Assets have since rocketed.

The firm’s tail risk hedge – or ‘black swan’ – strategy, which makes its returns during periods of economic volatility, is currently only open for investment to managed account clients.

Anthony Limbrick, principal and portfolio manager at 36 South, told HFMWeek: “We are very proud of the performance of this product, through what has been quite a difficult trading environment in terms of value opportunities and market behaviour.

“The performance is testament to a systematic approach to finding value based on proprietary processes and analytical tools.”

He added that the firm’s use of “positive carry” US dollar interest rate swaptions, on which they were able to cash up, generated many hundreds of percent returns.