Barnegat Is No 1 Fixed Income Fund, Not Just The Top In Bond Arbitrage

By Hedge Fund Insight staff

 

The Barnegat Fund is managed by Bob Treue’s Barnegat Fund Management Inc, a Fixed-Income, Relative-Value hedge fund manager based in Hoboken, New Jersey, USA. Barnegat focuses on interest-rate anomalies in the large, liquid markets of North America, Europe and the Pacific Rim. It captures these mispricings via government bonds, interest-rate swaps and futures. There have been plenty of slip-ups in this investment strategy – there may be more former “greats” in this category than current firms worthy of that title. History suggests through the lessons of Long Term Capital Management, Endeavour Fund, Vega Asset Management, and Weavering Fixed Income that risk controls are key when running narrow spreads with leverage.

Barnegat has managed to cope with the vicissitudes of running the strategy. They are many, if the list of 25 risks given in the firm’s ADV filing (and listed below*) is anything to go by. Indeed investors are explicitly warned in Barnegat’s marketing docs “Timing our trades is not our strength. The path can be brutal.”

However over the long term the trades have born fruit. Barnegat has made more than $1 billion for its investors since launch in 2001. Current assets under management are $676 million. Average assets under management over the 18 years has been $498 million. Over that lifespan, the fund has gained 1,228%, as its share price has grown from $1 in 2001 to $13.28 as of May 31st, 2018, which represents a net, compound annualized rate of return of +16.1%/year.

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Barnegat regularly compares its performance to other funds in Bloomberg’s fund database. The Barnegat Fund is classified as a ‘Fixed Income Arbitrage’ fund, a Bloomberg category containing 48 funds, of which 8 have been active since February 2001. For much of the last 18 years, we have been the #1 ‘Fixed Income Arbitrage’ fund as ranked by Bloomberg. We currently remain as the top fund.

Barnegat also regularly compares its performance to funds classified by Bloomberg as ‘Fixed Income’ funds. As of May 31st, 2018, Bloomberg monitored 24,072 ‘Fixed Income’ funds, of which 4,156 have been active since February 2001. For a long time, Barnegat’s performance since February 2001 would have made it the #2 ‘Fixed Income’ fund behind an Emerging Markets Bond fund. However, last month, Barnegat’s performance improved such that its 1,228% gain would have made it the new #1 ‘Fixed Income’ fund if it were classified as ‘Fixed Income’ by Bloomberg.

 

 

*Investment Risk, Trading is Speculative and Volatile, Trading Strategies, Directional Trades. Financing Arrangements, Highly Competitive Market, Market Participant Risk, Volatility, Lack of Liquidity, Importance of Market Judgment, Spread or Arbitrage Trading Risks, Distressed Securities, Trade Execution Risk, Manager Marks,
Hedging Transactions,  Effectiveness of Risk Reduction Techniques, Diversification Limitations, Short Sales, Derivative Instruments, Default and Counterparty Risk, Futures Trading, Exchange-Rate Risk, Investment Adviser Business Dependent Upon Key Individual, Limited Liquidity, and Brokerage Firms and Custodians May Fail.

 

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