Blog Title: Power Point, systems update, and Alpha...

Welcome to our blog.  We are using this platform to acquire further interest in our Private Fund and to provide on-going information as to what we are doing and how we are progressing in this challenging field as a Private Fund.  Currently our status is that we are seeking capital in April and May of 2012.  We will start trading our systems in June 2012.  All results posted are theoretical gains from our systems that we track hourly.  Real results could differ slightly due to slippage or other factors.  Please contact lee@kinshipinvestments.com for further information.

First off, I am a business owner.  Another business I own had a client ask for a certain service that we normally do not provide.  Being the helpful type we agreed to provide this service and doing so provide a savings for the customer even though we weren't fully experienced in it... How hard can it be?  It's not that far out of our norm...

First mistake.  You only do what you are confident you can do to provide an end result that your clients appreciate.  I knew this as we usually differ to our professionals to make sure the project is done efficiently and professionally.  This I learned a long time ago.  Apparently I'm human...

Second mistake: Saving money... Believing you may be able to do it cheaper than competent professionals may be true, but ultimately may put egg on your face.

Anyway my point is I have done many things in my career, but Power Point I have not :-)  Needless to say, I am asking for help from close associates.  Oy Vey... again it's one thing to present something coherent, it's another to have someone take you seriously because of what they see.  Really looking forward to our meetings in April.

So far March 2012 is looking like another great month for us.  Our MTS and STS are slightly negative (-1% each), but our VTS has been kicking butt with the yo-yo volatility lately (currently up 7.4% for the month!).

Results are now in for the Scotia Canadian Hedge Fund Index for February 2012:
http://www.scmonline.com/analytics/cgi-bin/hedgefund/entry_screen.cgi

I really don't understand how the majority of great Canadian Hedge Funds are not at least keeping pace with the market.  It flys in the face of many pundits, but most funds been consistent in NOT outperforming for the past few years.  At least they can truly say they are uncorrelated to the market...

There is a post of a past email as well here:
http://kinshipinvestments.blogspot.ca/2011/12/welcome-to-our-blog.html

We are posting these emails to possibly bring clarity to viewers that may not have been on our email list from more than a year ago.  We will be posting more as we move forward as our past emails have many great nuggets of information and shows we actually have been working on our Fund for awhile :-)

I wanted to touch base on Alpha.  What this means is the amount of true return over and above the benchmark associated to what those trades are based on.  Basically alpha is what I can provide in excess of the S&P.  If you every read books on 'Quants' or computer driven traders, alpha has a slang meaning where simply stated in a sentence, "He can find hidden alpha in the gold market like no other!".

Alpha represents to me this hidden truth that profitable hedge funds are able to find.  My point is (sorry for my obvious lead in), we have found 'our' alpha.  It has taken over 12 years, but in a way that's not such a long time as others who have been in this field for many years longer than I.

I had email correspondence recently with a fund manager who stated (not picking on you at all sir, it just was helpful in bringing up this subject), "Lee, I'm particularly impressed with your 2009 numbers catching off of the lows very early in 2009.  Any insight on the types of systems that performed well in that environment?"  This lead me to thinking what truely we are doing in our profession as fund managers...

Alpha is what it comes down to really.  Every Fund trader him/herself started their Fund on the ability and secret knowledge that they can beat the market.  First comes a theory, then comes creation, then comes testing to prove your theory.  Stating this is simple, but it is extremely difficult in practice.  Especially when traders think their Alpha was created by them rather than just stumbling across a profitable time frame... Either way, its a matter of finding this hidden alpha that only you and you alone understand and can profit from.  It truly is one of the most rewarding feelings in the world.  Think about it, there are trillions of dollars being moved around everyday by people who can destroy or create our world, and we've found ways of taking that money from them.  It's empowering and liberating, sort of like the feeling you get at being complemented by a client for a job well done.

Like being complemented as a professional.  (Yes, I like how I've come back to this point :-)

Where we call home (Vancouver Island) there are approximately 800,000 people.  There are many high-net worth individuals, successful business people, and wealth management firms.  As far as I know there is only one fund on our island that actually trades markets similar to ours.  There are only about 200 Hedge Funds in Canada and about $2 Trillion dollars worth of assets controlled by all Hedge Funds world wide.  Not one of these (or any other in the world) are able to achieve the same Alpha as ours.  We are not saying we are better than them.  We are different from them, just as all Hedge Funds are different from each other to a greater or lesser degree.

In this regard there is a near impossibility other Hedge Funds can mimic or profit from our Alpha.  It's akin to being hit by lightning at the same time as winning the lottery for someone to achieve what we have.  Don't get me wrong, this is the same as any other successful Hedge Fund that keeps their secrets close with many negative legal impacts.  We have learned much from people like Jim Simmons who have not had a (serious) breach of information since their inception in 1982 of Renaissance Technologies.

There is no way anyone can know how we get our buy or sells, how we utilize past and present data, how we can utilize our own results, and how we profit from them.

I have been stating for many months our Alpha is only able to project a maximum assets under management of $300 million.

Do you really think a professional would stop there?


Cheers,

Lee MacFarlane
President
Kinship Investments Ltd.
cel (250-818-5330)
office (250-385-9132)
fax (250-385-9134)http://www.kinshipinvestments.com/

check us out on 

Welcome to our blog.  We are using this platform to acquire further interest in our Private Fund and to provide on-going information as to what we are doing and how we are progressing in this challenging field as a Private Fund.  Currently our status is that we are seeking capital in April and May of 2012.  We will start trading our systems in June 2012.  All results posted are theoretical gains from our systems that we track hourly.  Real results could differ slightly due to slippage or other factors.  Please contact lee@kinshipinvestments.com for further information.

Another month gone and WOW, what interesting markets they have been recently.  Little volume and grinding markets.

I love just getting to the point so here are our updated systems results for our Private Fund (Month end - February 2012):

As you can see we have no problem with good results.  But, the most telling time will be when the S&P has some down months, then we will shine.  Sure, we can make money when the market is making money, but the question you and many others ask is:  Can we make money when the market is going down?

Our 2009 to 2011 results say yes.  See for yourself at http://www.kinshipinvestments.com/

We are quite happy with the recent results as the risk in acquiring our profits have a lower standard deviation than the S&P index.  Obviously the markets have been on a tear, and I am happy for people invested in the general stock market, but for us slow and steady is the game.

January results mirrored our benchmark, but February saw a choppy sideways market that provided mediocre results.  Our Volatility System shined during that time as we had a large breakdown in volatility which at times gives us a condensed large profit while our other systems don't do as well.  This is the reason we have diversified to a more volatility controlled system.

These results fly in the face of most CTA or Hedge Funds in Canada.  In fact here is the Scotia Hedge Fund Index:
http://www.scmonline.com/analytics/cgi-bin/hedgefund/entry_screen.cgi

Simply stated we kick their butt (so far :-).  Unfortunately the results only encompass to January so it will be interesting to see how we compare for February.  They always take forever in reporting previous months returns.

As promised we have further details on our fund:

Fees.

This is a critical issue that can make or break a startup fund like ours.  Potential investors see you as greedy if they do not see the value in investing when the results are watered down by fees.  Management and Performance fees cannot fly in the face of clients that do not see results.  We take this to hart.

As shown on our above result graph, we are now aligning ourselves with the S&P Benchmark historical average of 10% a year.  If we do not achieve our 0.8% accumulated return per month then we do not receive our monthly Management Fees.  Period.  If we do not reach our minimum target of 10% a year return then we also do not receive a yearly Performance Fee.  Period.  Even if we beat the market this year by 20%  as the S&P could be at minus 11% for the year and we can be positive 9%...  We would still not receive one penny of a Performance Fee at the end of the year.
Our Management Fee is 1.5%.  This is calculated by taking the end of the month capital, multiplying it by 1.5% and dividing it by 12.  Again, this is ONLY received if we surpass our accumulated benchmark of 0.8% a month.  The fine details of course is if we do not receive our fees in the first month (such as if we made 0.6% for the month), but in the next month we are above our accumulated benchmark (such as 2% for the first two months), then we DO receive our past month fees as well as the current.  In a nutshell, we do not recive our Fees if we don't make you money.  But to be clear, if we did recieve Managment Fees in the first 6 months of the year, but we ended the year below 10% then we do not 're-imburse' these fees.  Management Fees are calculated and paid monthly.


Our Performance Fee is 15%.  This is calculated by the end of the year profits minus Management Fees.  Again, Management Fees ARE included in this calculation.  So for example, if we did achieve 10% return for the year, but we incurred Management Fees during the year to pull down our TOTAL return to 9%, then simply stated we receive NO Performance Fee.

One last thing.  These terms are ONLY available to our initial investors.  Any investor we acquire after our initial starting period will have to pay the usual 1.5% and 15% fees as per usual Hedge Fund standards.  This means receiving 1.5% per year on the AUM (assets under management) no matter what our results.  We would also receive our 15% Performance Fee as long as we are above 0% for the year including Management Fees.

We are currently renovating our new home office with the highest computer and physical security we can acquire for our five computer office.  We are also creating our Power Point presentation which will be available for meetings in April.  If you have any interest in setting up a meeting in that month, let us know.  Otherwise, we will be contacting all wealth management firms on the island, some on the lower mainland, and also groups of individuals to set up our meetings.

I promise at this point there will be weekly blogs discussing what we are doing to fill in greater detail of our activities and answer some of your questions in regards to our systems.  Also we have a great amount of email correspondence that has been sent in the past that will be posted as blogs in the coming days.  Look out for those soon.  This may provide clarity about who we are, where we have been, and where we are going.

We have laid the foundation for a very unique and professional Private Fund.  I hope you will join us!

Cheers,

Lee MacFarlane
President
Kinship Investments Ltd.
cel (250-818-5330)
office (250-385-9132)
fax (250-385-9134)http://www.kinshipinvestments.com/

check us out on