Niederhoffer Capital manages more than $523 million and its flagship strategy, the Diversified Program was up 6.8 percent month to date through Feb 25 and more than 15 percent YTD which is a strong comeback after its underperformance of -22.4 percent in 2012.
The Diversified Program manages most of the total AUM, with assets close to $490 million. The firm’s Negative Correlation Program was up 5.7 percent in February while Optimal Apha gained 5.5 percent. Trend Hedge Program which attempts to protect from detractions in Macro/CTAs was up 7.6 percent. iHedge Inflation showed the least outperformance in comparison with +1.2 percent in returns.
Last year Niederhoffer Capital lost across the board in U.S. while doing somewhat better in non-U.S. fixed income assets and equities, thanks to Fed’s QE. Going forward Niederhoffer has made major portfolio changes to accommodate the uncertain future of the Japanese yen and has shaped its strategies to cash in from the weakness in commodities despite of the rally in stock market.
While we see hedge fund letters criticizing the Fed’s policies or detailing the high returns they have achieved from bouts of QE, Niederhoffer is the first one that appears hopeful that the effects of QE are ending and the economy will finally behave in an unpredictable fashion, which bodes well for Niederhoffer’s strategies. Moreover the market has now priced in whatever Fed has planned for them and have lately reacted less exuberantly to its policies.
There are more rumblings about what would be Fed’s exit strategy after trillions have been spent in asset purchase in the last two years, an issue that Seth Klarman was very concerned about in his latest missive to investors.
The fund’s CTA model indicates that commodities will be more volatile than equity markets. Niederhoffer is also positioned to tough out the equity market correction that is expected in the mid of 2013 after they finish their strong bullish run.