Author: Gordon Platt
London-based Focus Capital last month introduced a hedge fund that aims to achieve absolute returns from emerging markets irrespective of market conditions by investing in multiple asset classes. The Emerging World Fund diversifies risk by using a fund of funds approach to invest in emerging market equity, bond and hedge fund strategies.

“The choice of emerging market countries and assets in which you invest can dramatically affect returns,” says John Cleary, CEO and chief investment officer of Focus Capital. “Our investment process allows us to fully analyze and exploit all asset classes. As a result, we expect more than 80% of our performance to come from our strategic asset-allocation decisions,” he says.

At the end of April, the fund was approximately 90% invested, with around 50% in long-short local currency strategies and 40% in global emerging debt strategies. By comparison, the fund was 20% invested at the end of February, with 80% in cash strategies. In 2007 the fund was mainly allocated to emerging equity strategies. “We invest in emerging markets expecting volatility, which we manage using asset allocation,” Cleary says. The fund achieved a gross return of 19.2% against annualized volatility of 8.2% in the 12 months ended March 31, 2008.
Gordon Platt