Mr. Chandler: SEAL Capital has been running now for around three and a half months. We spun off from Seagate Global Advisors, where Mike Reveley, SEAL's Co-Managing Partner and CEO, and I were both partners. We decided to focus solely on a macro strategy - which is what we were primarily involved with at the previous firm - although we had several strategies running. Splitting the macro business away from the existing business enabled Mike and I to set up SEAL Capital and focus all our efforts on macro investment strategies, and build a successful hedge fund platform for those strategies.
"Macro" is a broad term. What it tends to mean, as it does with most firms involved in this space, is that we look at multi-assets across global markets; we are looking across the sphere of all tradeable opportunities from interest rates to currencies, credit, equities and commodities. What we generally try to do is take a broad fundamentally driven view of value and look for assets that either, one, misrepresent the value that we perceive or, two, correlate strongly with the valuation argument that we have. We look to exploit under- or overvaluation based on what is primarily a macro-fundamental set of drivers, while always employing other methods and proprietary tools to ensure our investment thesis is sound. These methods may mean our view concerning flow of funds or our view of the technical set up in the market, for example. There are always a number of factors that we use to temper our fundamental view, but the overriding view is one of fundamental valuation.
TWST: I believe that your fund features liquidity and transparency as important characteristics. Would you please elaborate?
Mr. Chandler: Liquidity and transparency have always been extremely important aspects of any fund, and especially so after the events of 2008 and into 2009, where investors were demonstrably frustrated by their inability to withdraw money from a number of investment strategies. Many funds blew up, including some who were in business for quite a long time. Unfortunately for investors, the lack of liquidity coincided with what was and remains an extraordinary financial crisis. This meant that the financial system was even more liquidity impaired. In part consequence, everything that we are involved with is highly transparent and highly liquid. If we had to, under any market conditions, liquidate the portfolio, we could do so extremely quickly and with very limited slippage.
We do a lot of tactical alpha overlay using the futures market. Certainly, we've been much more involved with the futures market from last year due to the fact that they are deep and transparent. Importantly, when dealing in the futures market, as opposed to the OTC markets, you don't have a single bank counterparty. For example, if you're relying on banks to finance cash bond positions, once these banks get in trouble, financing can be ceased or the upfront collateral payment may be increased on a moment's notice. When these collateral calls are actioned, large draws occur on hedge funds, usually at the worst possible time. Many hedge funds found themselves in a very, very poor liquidity position during the recent crisis.
SEAL typically invests in liquid emerging markets such as Brazil, Mexico and Eastern Europe, and some of the more developed Asian markets, such as Taiwan, Hong Kong and Singapore. We also invest in the broader G20, so everything from Australia, New Zealand, Japan, U.S., Canada, U.K. and the broader euro region. Since our fund is on a managed account platform, all of our investments are priced by an independent third party, which gives our investors a lot of surety. I think at the present time - and certainly in the unusual history that we've all been through in the last year or so - investors should take solace from our fund's transparency and liquidity.
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