Culross Global

About Us

Thematic Investing

Since we launched our flagship fund the Culross Global Fund in January 2000, we have employed the same top down macro approach across all our solutions. This approach uses 4-6 macro themes as the diversifying building blocks with each theme focusing on a specific investment story, macro narrative, industry sector, asset class or region which we believe is misunderstood or underappreciated by the market.

Each theme is populated with specialist funds or investment instruments that we carefully select not only for their standalone merits, but also for how well they fit the theme for which they are picked. A portfolio typically holds 12-16 managers or instruments in total. The essential advantage of using this thematic approach is that themes may be inherently long, market neutral, or short. This enables us to select and weight a combination of themes in the portfolio to achieve the overall bullish or bearish tilt that is appropriate for prevailing market conditions.

As the economic and market cycle evolves, we adapt the thematic composition of the portfolio by adding bullish, bearish or market neutral themes as appropriate. We believe that the successful management of an investment portfolio requires an investment process with a significant top down component. By including an assessment of macroeconomic and market conditions we are making an explicit attempt to avoid being in the wrong types of investment at the wrong point in the cycle.

The experience of many investors in 2007-08 shows the dangers of ignoring the broader macro outlook. Many were caught with injudicious exposure to leveraged strategies in illiquid assets as the business cycle transitioned to rising short term rates and rising mortgage defaults. During this period, the Culross Global Fund allocated to short credit themes, short financials themes, and long volatility themes. In 2007, the fund was up +37.5% net and in 2008, +3.2% net.

Our thematic approach requires ongoing macroeconomic research and market surveillance to identify changes, trends and opportunities. The objective of this forward looking process is to see change that the market has not yet identified or fully priced in. We study macroeconomic data, market price data and trends, central bank policy, government policy, political events, sentiment, fund flows, liquidity, cross asset correlation and volatility.

Examples of past themes include Japan Opportunities in 2003, European Economic Change in 2005, Asian Consumer Power in 2006, RMBS Opportunities in 2011, and Financial Sector Recovery in 2013. At the time each theme was implemented the story seemed controversial or contrarian to many. Within two years the picture had changed and each theme had become readily understandable.

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