Marcellus Fund, a hedge fund recently launched by Monument Securities, is considering using over-the-counter equity derivatives within a year. Grant Cullens, cio in London, said initially the European long-short equity fund will only use exchange-traded equity derivatives, but he will consider using sector-specific OTC derivatives as the assets it manages grow.
Sector-specific equity derivatives could be used to hedge single-stock positions, depending on the sector, said Cullens. If the fund is investing in stocks that are part of large sectors, it could be useful to have the ability to short the entire sector as a hedge against a reactionary sector move due to bad news from a single stock.
Cullens said the firm hopes to raise USD35-50 million by the end of next year with a three- to five-year goal of USD150-200 million. The asset manager has the capacity to use three-times leverage, but Cullens said he would lean toward being more conservative than that figure initially. Monument is targeting a return of 8-12% per annum. Deutsche Bank is the prime broker.
