Namaste Capital Management anticipates entering equity derivatives to risk manage its Namaste Fund, a long/short equity fund scheduled to be launched in January. Rui Matos, portfolio manager in Los Angeles, said the firm will buy puts and sell covered calls on both individual positions and indices in order to hedge the portfolio. Individual trades might stand as large as USD400,000 notional, while total derivatives contracts may represent around 50% of total assets under management, he said.
The firm anticipates launching the fund with assets of around USD5 million. Initial derivatives trades would likely be executed with Bear Stearns, which is the fund's prime broker. As the fund grows Namaste may consider shopping around for additional counterparties, Matos said.