Our results vary by market environments, user specified parameters, and money under management.Higher market volatility correlates historically with higher hedge fund performance.Sharply down market years, 2000 – 2002 and 2008 resulted in absolute gains for all of NorthStar’s hedge models.
There are three main control parameters for NorthStar’s hedge models: target investment leverage; target direction leverage, and target hold time.Target investment leverage of a portfolio typically uses 90% of the assets in the account for long positions; including shorts this target ratio is under 180%.
Target direction leverage in the portfolio is controlled by NorthStar’s proprietary Eagle Target Leverage.The “Eagle” is an approximate 3 - 6 month indicator for market direction; the computed value is used to dynamically weight the long/short leverage ratio in the portfolio.Ratio range is set not to exceed 60% and 40% of either long-to-short or short-to-long asset allocation. Clients can specify target hold time.Subject to a specified hold time, models are “tuned” for performance by controlling threshold criteria for closing positions based on NorthStar’s relative ranking system. The size of the account does influence annual returns.The table above illustrates four different size accounts subject to four different target hold periods.Returns are calculated on the last five years of simulated trading and are expressed as a fold return – for example, a $100MM startup with an average hold time between 1 and 2 months would have produced a 4.05 fold return over the past 5 years or $405MM (January 2005 to March 2010).
supporting investment managers through time-tested numerical modeling e-mail: info@NSForecast.com or call 1-978 461 2436