SilverPepper Long/Short Emerging Markets Currency Fund.
Discovering behavioral price-patterns in emerging-markets currencies
Distinguishing characteristics of the SilverPepper Long/Short Emerging Markets Currency Fund:
- Unique. America’s only currency mutual fund.
- Currencies have historically exhibited the lowest correlation to other major asset classes, making the Fund a potentially attractive diversifier.
- The Fund’s secret sauce lies within its quantitative model’s ability to recognize and potentially profit from the Behavioral Price Patterns of greed and fear that are endemic to emerging-markets currencies.
- Stemming from the desire to earn a higher rate of return, investors purchase the currency of an emerging-markets country, which typically offer higher rates of interest than do the currencies of developed-markets countries. From these purchases, an ascending price pattern develops, reflecting the behavioral economic motive of greed. (We buy or go “long” the emerging-markets currency when greed patterns are matched).
- As a currency becomes overbought, selling ensues. This descending behavioral price pattern reflects the emotion of fear. (We sell or “short” the emerging-markets currency when fear patterns are matched).
- The Fund seeks to profit from EM currencies in two ways.
- By exploiting the interest-rate differential (the “carry”) between the U.S. dollar and a select group of emerging-markets currencies, and
- By taking long or short currency positions in an attempt to profit from either an increase or decrease of an emerging-market currency’s price relative to the U.S. dollar.
- Together, capturing both carry and changes in price present an excellent opportunity to potentially generate positive returns, uncorrelated with stock and bond markets.
- The strategy is “absolute-return” oriented, attempting to profit in all market environments. It seeks equity-like returns with equity-like volatility.
- The Fund may help solve three diversification problems. It may:
- Diversify a traditional asset-allocation mix of stocks and bonds,
- Replace or supplement an existing emerging-markets stock or bond allocation; or
- Potentially increase the expected return profile (and volatility as well) of a portfolio’s “Absolute-Return Bucket.”
- Managed by Currency Experts. Portfolio Managers, John Dean and Ross Taylor, have held senior leadership roles at major global banks and trading firms, including Natixis, Bear Stearns, Currency Insights, and Donaldson, Lufkin & Jenrette before founding Absolute Return Strategies, Ltd in 2006 in London.