volatility exhibit
volatility exhibit

Artemis Vega Fund LP is the volatility strategic fund unit of Artemis Capital Management LLC. Founded by Christopher Cole, the company is headquartered in Santa Monica. Artemic Vega Fund generates crisis-alpha from options and volatility futures. Artemis is designed to provide direct exposure to increasing volatility (VIX above 30), giving investors a solid source of crisis-alpha. The fund simultaneously generates positive risk adjusted returns during normal environments.

During market crashes, Artemis Vega Fund is correlated to VIX, but is usually uncorrelated in normal environments. Since its inception in January 2012, the fund has produced annual returns of 15.67 percent. For the year 2012, the fund’s compounded annual return was 14.38 percent, compared to 17.53 percent of S&P 500 (INDEXSP:.INX) Index. But much higher than any volatility index. For example, HFRX Global Hedge Index gave a return of 8.97 percent in 2012, HFRX RV Volatility Index’s returns were 5.10 percent and Barclays ETN S&P VEQTOR ETN (NYSEARCA:VQT) yielded 4.04 percent in the same period.

Only Vix notes that U.S. markets have remained almost flat. VIX gained 0.12 percent settling at 13.07 Wednesday, while other CBOE indices moved less than 1 percent last week. The EuroStoxx Volatility Index closed at at 18.37 on Wednesday. The international market witnessed some movements. VSTOXX rose 2.57, while VNKY gained 4.37, continuing its upward trend over the week.

The Volatility Index Japan (VXJ) continues to rise. It gained from 22.11 on January 15th, to 27.99 on February 8th. In fact, investors are expecting  the trend to continue in months to come due to Japan’s aggressive attempts to spur inflation and economic growth in the economy.

The country’s current account deficit was almost double the expected 144.2 billion yen. And it was the first time since 1985 that Japan reported current account deficit in bank-to-back two months. This means a lot more weakness in the yen is required to generate structural reforms.

The Japanese monetary policies are undergoing massive transformation. To achieve its 2 percent inflation target, the Bank of Japan has been authorized to buy domestic and foreign assets, including equities. As a result, further weakening in the yen is expected, and Japanese equity could be on the way to a powerful rally. Japanese are much cheaper at 1.2x Price/Book compared to 1.5x for other global indexes. And they yield three times more than Japanese government bonds.

Looks like this is where the next big opportunity lies for Artemis Vega Fund.