Sanjiv Bhatia, chief investment officer of the Virginia-based hedge fund, said in a release that the PNM Capital Preservation Fund will be attractive for institutional investors that need to protect their investments and want moderate returns. The fund would, for instance, suit foundations and endowments that are looking for 7% to 10% returns, but are concerned about protecting their capital, he said.
“For them traditional hedge fund strategies which have a directional component are not appropriate because of the volatility in the returns stream,” said Bhatia, in the release. “This fund eliminates this volatility and can provide the required returns while still preserving capital.”
The fund’s capital will be invested in short-term Government securities, and the returns would be generated by EIS’ options overlay strategy. Bhatia said the overlay strategy is non-directional and relies on the relative mispricing in the options of correlated securities, according to the release.
In addition, the fund does not have a fixed monthly management fee, but instead charges only a quarterly performance-based fee. “I wanted to tell my clients – if we do not produce what we say we will, you don’t have to pay us a dime,” Bhatia said.