The Global Macro Bond Fund will sit on Schroder’s Global Alternative Investor Access platform in Luxembourg, which provides investors access to Ucits-compliant hedge funds.
Due for launch in October, it will join three other hedge funds on the platform, two externally managed mandates and one other internally managed mandate.
Jolly said in his 30 years as a macro manager he had not witnessed many instances where macro considerations were more important than anything else.
But at the moment he said there is “a lot going on and a lot of big picture influences that play into the macro landscape” and consequently it is the perfect time to launch a macro strategy.
The fund is targeting an annualised gross return of 8% above Libor per annum, a figure chosen because it is “do-able, achievable and not too much of a stretch”, according to Jolly.
Ambitious yield target
“Given the backdrop we have got and the guidelines you have to follow while in a Ucits framework we see 8% as reasonable. Of course it would be nice to have a double-digit return, but that is pushing it too far”.
While the fund may choose to trade volatility, Jolly said he does not wish to take excessive risk and the strategy will aim to have a Sharpe ratio of one.
The fund will invest in currency, sovereign and credit strategies, but will be managed without a style basis. “At times we will have a carry base and at others times use momentum or contrarian styles,” he explained, and by mixing up investment styles he hopes to avoid being correlated with “any other alpha source”.
In addition to drawing on nearly 100 fixed income specialists at Schroders Jolly will use a couple of quant strategies that have been developed in-house looking at returns on duration, curve, country allocation and currency.
Impressive track record
He pointed to both his own track record and Schroders’ record in similar strategies to back up a lack of correlation with the wider market.
Prior to Schroders Jolly worked at UBS as head of global sovereign, currency and UK fixed income portfolio management and before that was at Gartmore, latterly as head of currency and fixed income portfolio construction.
At the helm of the number one ranked UBS UK Broad Bond Market Plus Fund Jolly returned 10.3% per annum over three years and 21.9% per annum over two years to March 2011, according to a Mercer Investment Performance Survey.
Over the same time periods the Schroder Aggregate Fixed Income Fund returned 7.7% per annum and 9.7% per annum respectively.
Jolly said the initial shape of the portfolio would depend on the extent of the market sell-off in the weeks before the launch.
If he sees the more aggressive sell-off he expects, he will start selling commodity currencies – the Aussie dollar and New Zealand dollar – and if markets are too relaxed and volatility decreases he will buy into it in the hope it will bounce higher when risk aversion returns.
