Concept of The Fund

  General information*

 

 

 

 

 

 

 

 

 

 

*The Fund is on the process of establishment and currently no investment activities are carried out. Estimated legal framework is the Law on Collective Investment Undertakings Intended for Informed Investors of Republic of Lithuania.

 

Investment vehicle

 

The Fund assets are invested only in the Currency market, in the three most liquid currencies of the world:

 

  • US dollar (USD);

  • European single currency the euro (EUR);

  • Japanese yen (JPY).

 

Investment transactions are made in the spot market with EUR/USD, EUR/JPY and USD/JPY currency pairs, which reflect nearly half of the world economy in terms of GDP.

 

Risk management

 

Fund asset management is based on binary account structure, where investment transactions are made in two separate sub-accounts. Each sub-account has pre-determined directions of investment transactions for each used currency pair ("long" direction ↑or "short" direction ↓).

 

General Fund‘s account

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-account No. 1                                                        Sub-account No. 2 

 

The illustration above shows the determination of directions for investment transactions in both sub-accounts. Chosen approach creates two opposite arbitration cycles that Fund managers can use as a two-level tool for hedging of unnecessary exposure inside the fund:

 

  • Inside sub-account through currency triangular arbitrage. For example, the opening of the same amount at the same time of EUR/USD "long" and EUR/JPY "short" positions gives equivalent effect to the account as an adequate size of USD/JPY "short" position. When at the same time we open corresponding amount of USD/JPY "long" position, then arbitration cycle is closed and total open position (exposure) becomes equal to zero (for other combinations see picture above). In this case, changes of exchange rates do not affect sub-account’s value, despite the fact that there are three open investment positions.

 

  • Overlap of the sub-accounts. Each sub-account for each currency pair has fixed directions of investment transactions, which are opposite to the other sub-account. This means that if we make two separate transactions in the same pair and the same amount in both sub-accounts, their general influence to account’s value is neutralized. Because directions of transactions are opposite and the loss in one sub-account is covered by the profit in other sub-account.

 

Leverage

 

According to Investment Rules of the Fund, the leverage can be used for its investment activities. The maximum possible actual leverage for unprofitable positions is 7,5:1, but due to applicable principle of currency triangular arbitrage, its impact to the account’s value will not be greater than 2,5:1 (the maximum possible net leverage). In case of activation of all possible hedging mechanisms, the actual leverage may increase up to 15:1 and the net leverage up to 5:1, but these leverage levels are possible only in theoretical considerations.

 

Under normal operating conditions, the net leverage for unprofitable positions does not exceed 1,25:1. Leverage for profitable positions generally is unlimited, but setting of automatic protection levels (Stop Loss) is a must.

 

Exit from long-term open positions

 

The Fund Investment Rules declare a policy that within 15-25 weeks more than half of all current cumulative long-term open positions must be closed. Therefore at the end of each week a fixed percentage amount (from 2% to 5%) of current open positions in each currency pair is closed by applying the FIFO rule.

    Fund Type

Legal Framework*

Investment Policy

Investment Market

Target Customers

Investment Objective

 

Exclusiveness

  Open-ended investment fund, designed for informed investors.

Law on Collective Investment Undertakings Intended for Informed Investors of Republic of Lithuania.*

Long-Short Hedge fund.

Currency market.

Professional and informed investors.

10-16% stable annual net return.
Fund returns do not depend on the state of global economy and do not correlate with the falling capital markets or economic cycles during the crisis times.

The information contained on the Web Site has no regard to the specific investment objective. The content published on the Web Site is solely for informational purposes and it cannot be interpreted as solicitation or any offer to buy or sell any spot currency transactions, fund shares or other financial instruments. You should not rely on data or other information provided on or accessible through the use of the Web Site for making financial decisions.