Volatility specialist looking for right conditions for next fund

Article in Pensions and Investments

Macro/volatility specialist manager 36 South Capital Advisors LLP has an obsession with all things black, especially black swans and black diamonds.

Founded in 2001 in Auckland, New Zealand, where native black swans (the avian type) are prevalent, the firm moved its headquarters to London in 2009 because “we were just too far away for institutional investors to do due diligence on us,” said Richard “Jerry” Haworth, principal and chief investment officer.

Once 36 South was settled in a major financial hub, institutional investors took notice and assets under management have grown 12 times to just less than $500 million today, about half of which is from pension funds, endowments, foundations and insurance companies.

Mr. Haworth said institutional interest in the firm's long-dated options portfolios that invest in undervalued global currency, fixed-income, equity and commodities markets remains high.

But what many institutional investors are waiting for is the successor to 36 South's wildly successful, short-lived [left tail fund], which capitalized on the severe left-tail-risk event (i.e., a financial black swan) generated by the financial crisis in 2008 and returned [significant gains] that year to investors. An earlier fund in the series is named after the world's most famous black diamond.

36 South is readying the latest tail-risk fund for launch this year, once volatility conditions are right. Mr. Haworth wouldn't predict when those conditions might coalesce, but hinted cryptically that “we are looking for a running start.”