Former GMO and State Street Global Advisers MD Alex Orus has launched a new boutique investment manager, Blue Diamond Asset Management.
Orus is acting Managing Partner and Chief Investment Officer of the Swiss-based firm, which plans to launch a range of funds based on its Blue Diamond Real Return Strategy. Funds will be structured to outperform the most relevant measure of inflation for investors and denominated in the appropriate currency. Performance fees will only be charged on returns after inflation.
The Blue Diamond Real Return Strategy has two components – a valuation process and a momentum process. The valuation process invests in a variety of global and domestic equity and bond markets as well as cash. Blue Diamond calculates the fair value of asset classes, in real terms, based on mean reversion over a full market cycle. It then allocates capital dynamically to undervalued asset classes and stays out of expensive asset classes.
The momentum process provides diversification by profiting from price trends. In addition to equities and bonds, it invests in commodities and currencies, and can take short positions.
CIO Alex Orus says: “After the financial crisis, investors started to reevaluate how they allocate their assets and how they perceive risk. In the past, the focus has been on nominal returns and beating asset benchmarks. Investors are now realising that one of their biggest risks is the failure of their asset performance to keep pace with inflation, which can erode capital over a surprisingly short amount of time. Our strategy will address this, not merely by protecting against inflation but by seeking to consistently deliver returns above it. Our risk management process involves avoiding bubbles and crashes, thus minimising downside risk.”