Make the most of falling markets
Triple3 Volatility Advantage is a hedge fund strategy that invests in volatility index (VIX) options and cash and aims to generate long-term absolute returns that are negatively correlated to the US equity market. The fund offers potential diversification benefits as a "tail hedge" asset within an overall client portfolio and the strategy is based on the premise that volatility tends to be negatively correlated to equity indices - that is, when equity markets fall, volatility tends to rise.
Triple3 is a niche volatility manager, specialising in volatility research and investment management. Triple3's investment approach is purely quantitative and the investment team of four has built proprietary volatility models to analyse data and forecast volatility. The Triple3 team, which includes two PhDs, is led by Simon Ho, who has previously worked with a number of investment banks, including Goldman Sachs, JP Morgan, Merrill Lynch and Deutsche Bank.
Lonsec believes that the strategy is particularly appealing in that it is designed to be negatively correlated to US equity markets (as shown by the chart below) and that the manager's skill lies in its ability to accurately forecast volatility and option prices.
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