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A Discussion with Jeff Kong: His Top-Ranked Fund Strategy and Why Carry is King
Jun 15 20162 Comments
Jeff Kong launched the Tradex Relative Value (TRV) Fund in 2015 to capitalize on his decades of trading success in the structured rates markets. He is one of the most well-known and respected mortgage prepayment traders in the alternative investment industry, having produced a 23%+ annualized net return over a 10 year period while managing Structured Portfolio Management’s (SPM) flagship Structured Servicing Holdings (SSH) Fund. Having produced a 135% return in 2009, the Fund was ranked the #1 large hedge fund in the world by Bloomberg Markets, and was ranked #8 on Barron’s Top 100 List. Prior to launching his fund at Tradex, Jeff also worked at John Burbank’s Passport Capital as the portfolio manager for the M1 Fund.
In this Opalesque.TV interview, Jeff introduces the motivation for launching TRV, where he seeks to replicate the features of his previous funds’ trading success, while expanding his trading strategies into three distinctive sleeves to capitalize on his experience through multiple market cycles. He discusses the components and advantages of his market-neutral, absolute-return strategy, a strategy that utilizes proven, proprietary models to purchase mispriced government-guaranteed securities in order to provide cheap carry while mitigating interest rate risk. Jeff also presents the value that this “all-weather” strategy brings to investors in a challenging 2016 environment, where strong carry, alpha generation, and liquidity management can capitalize on market volatility. Jeff discusses the value of investor transparency, and he clarifies some investor misconceptions about mortgage-related strategies that when designed correctly can drive significant absolute, uncorrelated returns.
Learn more about:
Jeff Kong’s pedigree: 23%+ annualized net return over 10 years running SPM’s SSH Fund in structured rates market
Outsized returns: 135% return in 2009, earning Bloomberg Markets’ #1 large hedge fund designation
Tradex Relative Value Fund launched with the backing of previous investors
Three trading sleeves of TRV’s absolute return strategy are built to capitalize on Jeff Kong’s market experience:
Prepayment Arbitrage: Extracting value from Agency mortgage-backed securities while hedging interest-rate exposure
Relative Value: Short-term trading liquid pass-through securities to generate alpha
Opportunistic: Capitalizing on outsized opportunities within the fixed-income markets
The investment edge that drives TRV returns:
Proprietary research and valuation models
Purchase mispriced government-guaranteed securities to provide cheap carry in an interest-rate neutral strategy
Robust risk, liquidity and exposure management to capitalize on potential volatility given the challenging 2016 environment
Rely on decades of experience to understand prepayments in mortgage markets
Not all mortgage-related strategies are subprime credit trades
Value of an “all-weather” strategy with strong carry and liquidity to capitalize on volatility
Jeff Kong launched the Tradex Relative Value (TRV) Fund in 2015 to capitalize on his decades of trading success in the structured rates markets. He is one of the most well-known and respected mortgage prepayment traders in the alternative investment industry, having produced a 23%+ annualized net return over a 10 year period while managing Structured Portfolio Management’s (SPM) flagship Structured Servicing Holdings (SSH) Fund. Having produced a 135% return in 2009, the Fund was ranked the #1 large hedge fund in the world by Bloomberg Markets, and ...more
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