Hedge Fund Awards 2015

Hedge Fund Awards 2015 www.acquisition-intl.com 34 Best in Global Interest Rate Specialists Dix Hills Partners LLC For over 11 years, Dix Hills Partners LLC has specialized in managing global interest rate exposure, converting interest rate volatility into excess return. We provide custom-tailored investor solutions, ranging from interest rate hedging to an absolute return strategy employing either long or short positions in global bond futures. We caught up with William L. Gordon, Partner and CEO, for a quick Q&A session on his firm s investment strategy, the state of the industry and where the company is headed in the future Please tell us a little about your business and the work you do. Our systematically based investment strategy is derived from extensive research on over 50 years of interest rate movements. We forecast the short-term direction of interest rates with sufficient accuracy to generate attractive returns that are sustained over the long-term. Our expectation is to forecast these moves with 60-65% accuracy. Additionally, we expect the profits on winning forecasts to be greater than losses on unprofitable ones, leading to an attractive risk-adjusted return for investors. To achieve high liquidity and diversification, we trade the four most liquid sovereign debt markets (US 10 Year Treasury Note, German Bunds, UK Gilts and Japanese JGB’s). Our investment process is designed to be independent of interest rate di- rection, having a net zero duration exposure over time. Our resulting alpha has no correlation to most major traditional and alternative benchmarks or assets classes. Thus, blending our strategy with other programs often improves the resulting portfolio’s risk-adjusted return as well as the abso- lute return characteristic. While no future guarantee, our past track record demonstrates we have delivered on these objectives since inception. Investors seek us out our expertise to capture the potential to achieve two objectives: • We can be invaluable to investors who are concerned about managing their global interest rate exposure. • We offer investors a unique opportunity to capitalize on these short-term movements to generate excess returns. Potentially attractive attributes of our strategies are as follows: • Our “alpha” has no demonstrated correlation to most major traditional and alternative benchmarks or assets classes • No long-term directional exposure bias, resulting in a net zero-duration exposure over time. • Daily liquidity with minimal counterparty risk Does managing a strategy solely based on interest rate forecasting present any specific challenges or opportunities? Significant opportunity exists because institutional and individual investors are requiring this expertise now more than ever, as they seek to manage the conundrum of historically low yields combined with potentially high future interest rate risk. The value of the opportunity can be seen in the tremendous dispersion of total returns in the 2014 performance results of those mutual funds in Morningstar’s Non-Traditional Bond category. Individual annual fund performance in 2014 ranged from a low of a -10% return to a high of a +10% return. This helps to highlight the return potential that exists in successfully forecasting the interest rate or duration decision, while also highlighting the risks. There are some big challenges as well. Despite being such an important concern for most investors today, few of them seek out a pure “interest rate specialist”. Several reasons may be driving this: • Interest Rate Specialist is not a “bucket” within institutional allocations • Few managers have demonstrated consistent and substantive alpha from interest rate decisions. • Investors delegate interest rate exposure to their existing fixed income or global macro managers. Investors who are expecting their managers to answer this decision effec- tively going forward should focus their due diligence on manager return attribution, specifically analyzing the success of a manager’s interest rate exposure decisions. Alternatively an investor might suggest that the manager avoid making that decision (as some investors do). What would you say is the strength of your investment process? The strength of our investment process is rooted in its philosophy’s four major building blocks: Fundamentally Based - Global interest rate movements reflect economic fundamentals ● We carefully track economic fundamentals that show consistent value Fact File Name: William L. Gordon Email: [email protected] Website: www.dixhillspartners.com Tel: +1 516 393 9136 Best in Global Interest Rate Specialists