A selection of hedge fund account offerings available to both retail and professional investors

Transcription

1 A selection of hedge fund account offerings available to both retail and professional investors Titan Investment Partners was founded in 2012 in response to a gap within both the fund management & spread betting industries. Titan s aim is simple to achieve absolute returns for investors in a tax free* manner in each of our funds through the use of a spread betting account. Company Registration number Authorised and Regulated by the Financial Conduct Authority. Registration No

2 About Us Titan s aim is simple - to achieve absolute returns for retail investors in a completely tax free manner. Current tax legislation allows us to use the mechanism of a spread betting account to achieve this. Unlike the typical spread betting approach applied by many traders however, here at Titan we apply professional fund management techniques of diversification, position sizing, stop losses (where appropriate) to improve returns and reduce risk. Institutional quality research and execution capability The Directors are supported by compliance consultants and a dedicated trader in managing the funds. Additionally, through their partnership with professional broking specialists Peregrine and Black, they have access to both a wide range of institutional research and trade execution mechanisms that are more typically enjoyed by large institutions. Choice of either a spread betting or CFD wrapper Some clients may not be able to take advantage of the extensive benefits that a spread betting account has under UK legislation such as corporate bodies, overseas resident individuals and those wishing to place our funds within a SIPP. Director Backgrounds Titan s directors have backgrounds in the financial markets from both the capital markets and fund management perspectives. In fact, our team have collectively over 100 years experience in the markets from both buy and sell side. Richard Jennings Richard Jennings is a former fund manager at one of the largest public sector pension funds in the country where he managed over half a billion pounds. He qualified as a Chartered Financial Analyst (CFA) in 1999 and also founded the respected Spreadbet Magazine publication which was sold in 2014 to concentrate exclusively on the opportunity here at Titan. Graeme Kyle Graeme Kyle joined Titan in He was previously a senior fund manager at large Irish investment house Setanta AM where he was a key member of the Global Equities team. During Graeme s tenure this team consistently outperformed their benchmark with a value driven investment style. Graeme is an Associate of the CFA (UK) From July 2014 Titan also now enjoys the FCA licence to manage capital for clients in a CFD wrapper.

3 Complete fund manager & client alignment One of the unique elements of our offering is that each of the funds master accounts from which all individual client accounts are replicated have been seeded by us with OUR own money. Put simply, our gain is your gain, and your pain is also our pain. Accountability & transparency As with other traditional fund managers, we also produce quarterly investment reports explaining our thinking on the markets and an overview of the reasoning behind some of the position movements during this period. This is part of our checks and balances approach. One major difference with us however is that unlike other typical fund managers, your account with us is viewable in real time, 24 hours of the day. In effect you have your own front seat to our investment manager s thinking and trading and investment capability. Affordable entry threshold Most traditional hedge funds require a minimum six-figure investment from their clients and long notice periods to withdraw funds, we don t. Our minimum investment is 10,000 and funds can be withdrawn at any time (but may take up to seven days for the account to be liquidated for larger accounts or in exceptional market environments). We believe passionately that having our own skin in the game is important and that the alignment of interests concentrates the fund manager s mind. After all, if a fund manager doesn t have his own capital at risk, why should you put yours at his/her disposal? We would stress however that the funds are not to be viewed as short term trading offerings. The typical fruition period for our views to bear out, and be measured against is months and we encourage all investors to have a medium term time horizon to allow us to maximise the risk/reward trade off.

4 Our Investment Approach At our heart is the belief that markets are inefficient and that there are frequently dislocations of value. Since the very inception of markets, asset classes swing between the two pendulums of fear and greed and this is even observable right down to an intra-day basis. At Titan, our equity based funds are based around the principle of buying value. And then being patient. Value investing often involves going against the supposed 'wisdom' of the crowd. With the application of leverage, this can naturally result in periods of under-performance over the shorter term. The benefit of a spread betting account, aside from the tax free nature of potential gains, is that it allows you to apply leverage. Leverage magnifies gains but also losses and used in an inappropriate manner can be devastating. It is this very respect for leverage that at all times governs our application of it within our funds. As you can see from our investment approach we have core positions in specific asset class plays and then leverage these appropriately. The application of this leverage being in a contra cyclical manner, ie the cheaper and more dislocated the asset class becomes, the more gearing is applied. And vice versa as it becomes expensive and deviates beyond our perceived value parameters. We have capped leverage levels and additionally mandated minimum diversification of positions so as to reduce unsystematic risk in relation to equity positions and also have maximum limits on other capital markets instruments that are detailed in each fund s mandate. We re-iterate that our funds are not to be viewed as quick fire return mechanisms but rather medium term investments to complement a balanced portfolio. If our view is correct and the market pendulum swings back towards fundamental value, then the leverage inherent in the portfolios creates outperformance. Absolute returns - our sole focus Aside from core investment positions and the fundamental tenet of the search for value, If we believe that it is appropriate to trade around our core investments, then we are not afraid to do so and in fact make extensive use of options in this approach for both income generation and hedging purposes. At all times absolute returns are our focus and we are most certainly not closet indexers.

5 Fees Titan s fee structure is extremely simple, and compared to most hedge funds very competitive. From July 2014 we have waived the initial fee (which can be up to 5% for many funds). Our annual fee of 1.25% to cover running costs also contrasts with the typical 2% for most hedge fund type offerings. Performance Fee Comparison Our performance fee is subject to a high watermark, meaning that it only gets charged for incrementally positive returns. For example, if we rose by 15% in a particular quarter (the fee is charged quarterly) from say 1m to 1.15m then the fee is charged on the 150k rise. If the fund value then fell by say 20% to 920,000 the next quarter, there would be no performance fees charged until the fund value was once again above the 1.15m level the previous high watermark level. As with a traditional hedge fund, our fees are orientated towards sharing in outperformance. Gains in our fund are tax free (losses are not allowable for tax purposes however) and our fees are less than current Capital Gains Tax rates. With current CGT rates at 28%, our performance fee of 20% of the absolute returns generated still results in a tax saving of 8% if not held in a spread bet fund (please note that should losses be incurred on the funds that these are not CGT allowable however). Gain, before charges Performance fee - 20% CGT 28% Net return to investor Other funds - 1,000 (200) (224) 576 Titan - 1,000 (200) nil 800 Instant access to your funds Unlike many hedge funds where there are long lock-ins and specific redemption dates, here at Titan, aside from seeing your accounts in real time, you also have immediate access to your cash should you wish to withdraw (although we do reserve the right to take up to 5 working days for larger account sizes where holding realisations may be disruptive).

6 Fees Graphical illustration of High Watermark 1,600,000 1,400,000 1,200,000 1,000,000 Fund Value High Water Mark 800, Q1 500, ,000 Q2 750, , ,000 Q3 1,000,000 1,000, , Q4 Q1 1,150, ,000 1,150,000 1,150, ,000 Q2 1,000,000 1,150,000 Q3 1,200,000 1,200,000 0 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q4 1,500,000 1,500,000 Fund Value High Water Mark Increase Over HWM Fee payable 20%

7 Funds - Titan Global Macro Mandate Overview Win/Lose ratio since inception (to 30 Jul 2014) X 1.35 Best monthly return since inception % Maximum monthly drawdown since inception (16.2%) The Titan Global Macro fund is our flagship fund which focus primarily on asset allocation in driving excess returns. We position the fund in those asset classes that we believe have the best potential for returns (long or short) over both medium and long term timescales. It is the most aggressive of our fund stable and should be viewed towards the higher end of the risk spectrum. Aside from our asset allocation calls, we also look to take spread bet positions in special situations typically stocks that we believe are under or overvalued. We operate within the following parameters maximum investment of 2.5 times net equity for stock positions; 3 times net equity for commodity positions, 4 times net equity for index positions and 6 times net equity for currency positions (all on a gross notional underlying basis). Bond and fixed interest exposure is capped at 4 times net equity. Option trades will account for no more than 10% of the funds value on a paid for premium basis. Additionally, no one stock position will account for, on an underlying value (stake x underlying price), 15% of net equity. When the stock component is fully invested, there will be a minimum of 8 stocks although stretch for profitable positions is allowed up to 20% of net equity, at which point profit taking cuts back the position. Where a sectoral instrument, ie an ETF is used to gain exposure to a sector, the maximum % investment relative to net equity is 50%. In calculating the net gearing levels, both long and short positions are not netted against each other per many other funds but are in fact actually added together given the potential for positive correlation in both long and short plays. We believe that this is a more sensible way of calculating gearing levels, contrary to the hedge fund industry standard.

8 Funds - Titan Natural Resources Mandate Overview Win/Lose ratio since inception (to 30 Jul 2014) X 1.62 Best monthly return since inception % Maximum monthly drawdown since inception (16.5%) The Titan Natural Resources fund invests principally in commodities, natural resources stocks and other related spread bet including options. It is a predominantly long biased fund and was set up in July 2013 purposely to take advantage of what we perceive to be an exceptional investment opportunity in this arena at that time. We operate within the following parameters maximum investment of 2.5 times net equity for stock positions; 3 times net equity for commodity positions and 4 times net equity for index positions (all on a gross notional underlying basis), the latter typically being used for hedging purposes. Option trades will account for no more than 10% of the funds value on a paid for premium basis. No one stock position will account for, on an underlying value (stake x underlying price), 15% of net equity. When the stock component is fully invested, there will be a minimum of 12 stocks although stretch for profitable positions is allowed up to 20% of net equity, at which point profit taking cuts back the position. Where a sectoral instrument, ie an ETF is used to gain exposure to a sector, the maximum % investment relative to net equity is 50%. In calculating the net gearing levels, both long and short positions are not netted against each other per many other funds but are in fact actually added together given the potential for positive correlation in both long and short plays. We believe that this is a more sensible way of calculating gearing levels, contrary to the hedge fund industry standard.

9 Funds - Titan Precious Metals Mandate Overview Win/Lose ratio since inception (to 30 Jul 2014) X 1.39 Best monthly return since inception % Maximum monthly drawdown since inception (21.5%) The Titan Precious Metals fund focuses exclusively on precious metals stocks, commodities and other related instruments including options. It is a predominantly long biased fund and was set up in July 2013 purposely to take advantage of what we perceive to be an exceptional investment opportunity in this arena at that time. The life of the fund will be for a minimum of 2 years and it is operated on the following basis maximum of 2.5 times the net equity for stock positions; 3 times net equity for commodity positions and 4 times the net equity for Index positions. Option trades will account for no more than 10% of value of fund on paid for premium basis. Additionally, no one stock position will account for, on an underlying value (stake x underlying price), 15% of net equity. When fully invested, there will be a minimum of 8 stocks. Where a sectoral instrument, ie an ETF is used to gain exposure to the sector, the maximum % investment relative to net equity is 50%. In calculating the net gearing levels, both long and short positions are not netted against each other per many other funds but are in fact actually added together given the potential for positive correlation in both long and short plays. We believe that this is a more sensible way of calculating gearing levels, contrary to the hedge fund industry standard.

10 Q&A Q. What makes Titan Investment Partners (TIP) different? A. TIP is pioneering a new type of asset management class within the fund management industry. We marry traditional fund management techniques, albeit with higher leverage levels than typically found in retail investment funds, with the tax advantages of a spread betting account. We believe that the breadth of our fund offering housed within either a spreadbet or CFD wrapper is unique within the industry. Q. Just how do the funds work? A. The funds are organised as actual master accounts in which all trades are made and whose capital comprises of Titan s Director s own. The trades made in the master accounts are immediately reflected in our individual private investors accounts and traded at the SAME price. Investors are also able to see their account values 24/7 in real time. Importantly, while our investors are able to view their individual accounts and may withdraw amounts of 1,000 or more at any time (although larger withdrawals may require up to seven days for liquidation) subject to maintaining a minimum investment of 10,000, they are not able to trade on those accounts. The investors power to trade is delegated, under an agency agreement, to Titan. Only Titan is allowed to trade your account. Your cash, contact details etc are all be held by Titan s FCA regulated partner spread bet firms. The vast majority of our trades are executed through our partners at City dealing specialists Peregrine & Black. This ensures that our clients enjoy the same execution benefits that an institutional client does such as Direct Market Access, dark pool involvement, RSP pricing and participation in placings (when appropriate). Q. Can I receive a margin call? A. Although it is highly unlikely you will receive a margin call given the risk mitigation measures we take through diversification, position size restrictions and dialled back leverage, you should be aware that major market dislocations periodically can and do occur and, in such an event, margin requirements on the underlying positions can be raised with immediate effect. In this instance, extra cash may be required to be injected into your accounts and so you should ensure that you have sufficient free liquidity reserves outside your account to accommodate such a scenario. Q. Can you explain how gearing / leverage works? A. Gearing / leverage increases the possibility of return and similarly loss. 100 invested without leverage making a 5% return, brings a 5 profit for the investor. 100 geared or levered 50% with the same 5% return brings the investor a profit of Gearing gives the possibility of enhanced market returns. This of course works to the investor s detriment on the downside however.

11 Q&A Q. Who are our funds aimed at? A. Our funds are aimed at those individuals who have spare investment capital and where they are prepared to embrace a higher level of risk in its investment, certainly a higher risk level than that typically offered through mainstream investments. In exchange for this risk is the expectation of higher returns from a tax free account. Titan funds are not intended to be a replacement for a balanced portfolio, pension or savings scheme etc but rather a complement to these core investment products. Q. What investor protection do I have? A. As an FCA authorised and regulated firm, we have to adhere to strict regulations to ensure appropriateness of product and fit and proper basis of operation. From a capital security perspective, all eligible retail clients are automatically covered by the FSCS (Financial Services Compensation Scheme) for losses through insolvency of either Titan or our partner spreadbet firm up to 50,000. The vast majority of UK individual clients will be designated retail status. For more information regarding eligibility view or the FSCS website. Q. Can you explain the "high watermark" please? A. The high watermark is a mechanism that avoids the investor being double charged for the same returns. For example, if you invested 10,000 and a return of 4,000 was achieved over a performance calculation period, then you would pay 800 in performance fees. If however the fund fell in value back to 10,000, we would only be able to charge performance fees in future on those returns generated over the previous high watermark ( 14, ). Q. How easily can I access my cash? A. In most instances, should you wish to withdraw cash or close the account, this can be facilitated the same day. However, in order to protect you and other investors, in certain circumstances, we reserve the right to wait up to 5 business days to liquidate your account in full. If you wish to remain invested however, a minimum account balance of 10,000 will required to be maintained.

12 Q&A Q. How are dividends treated? A. You are not subject to the overall charge of 32.5% on dividend receipts which would be the case with receipt of a dividend in the usual way (outside of an ISA of course for higher rate tax payers). In fact, in both a higher rate and standard rate taxpayer s case, the dividend credit via our spread betting managed accounts is actually more tax beneficial as you receive 90% of the gross dividend credit on those stocks that pay dividends. Q. Can I add additional cash to the account? A. You can add cash at any point to the fund and of course the high watermark is adjusted to reflect this. Q. Is there a limit and minimum investment amount? A. The minimum investment is 10,000. Additional investments in multiples of 1,000 can be made. There is no maximum investment. Q. What other attributes does this unique mechanism have relative to traditional funds? A. The borrowing cost on the spread bets in our funds is generally around 1.75% over Libor much less than if you had a typical spread betting account. If you were to borrow funds in your own capacity to invest in the stock market, it is very unlikely that a bank would offer you anywhere near these borrowing rates. In effect you are achieving wholesale funding rates typical of very large corporate s. Additionally, we have negotiated spread rates of no more than 10bp (in relation to UK stocks) excluding the natural underlying market spread again much less than most typical spread betting accounts. There is also no limit on the investment you can make with us unlike an ISA. Finally, we have arranged with our partners a non recourse basis of operation on the majority of our funds too. What this means is that unlike a traditional spread betting account where, in the event of a major market dislocation, you could lose more than you deposit, with Titan s funds this cannot occur. Q. How do we get started? A. Simply complete the application form found on our Open Account page and follow the instructions there and we will do the rest. You can of course call us on should you require any help.

13 Titan Investment Partners Ltd Ground Floor Sceptre House Hornbeam Business Park Harrogate, HG2 8PB Titan funds involve the use of leverage and so could result in losses of some or all of the capital invested. As such, investments in Titan funds are riskier than investments in conventional non-leveraged funds. Margin calls may be made at some point in the future and should you be unable to meet the margin call then you may be forced to crystallise a loss at that point. *Spread betting in the UK is currently free from CGT but this may change in the future