Baggley, together with Alex Allen, chief investment officer, has created Eddington Macro Opportunities Fund, described as a "portfolio of moderately concentrated high-octane opportunistic macro-related managers".
explains that the funds in the portfolio cover a variety of macro strategies.
It then targets a handful of funds that use these strategies.
"We are not fully diversified by number, but by pricing the best macro managers across asset classes.
So no matter where the market goes, we need to think of other factors," he
Diversity in action
The diversification of managers, based on the overall ideas of how the market will behave, means that no matter when a change occurs, or if movement is up or down, the portfolio will catch the upside.
"We diversify by short-, medium- and long-term manager strategies, divided by an investment horizon.
It is an important consideration," comments Allen
This gives them a mix of track records, but "overall we get a smoother return" Allen
The point about the macro view, explain Allen
and Baggley, is that they never know which fund will follow which track.
By October 2007, according to Allen
, the credit market had already imploded.
Looking to 2009, Allen
says Eddington's view is that the US dollar should begin a significant devaluation against a basket of currencies including yen, euro, sterling, Swiss franc and Canadian and Australian dollars.
believes it is overvalued and could go down 50%-70% against other currencies.
This could happen at any time although he
expects the downward movement to start in 2009.
For the equity market, he
sees a 50%-60% downside and does not believe the market has hit bottom yet, expecting another downward movement with some brief rallies.
is bullish on commodities expecting severe inflationary pressure eventually to feed into commodity prices.
also thinks US government bonds and, indeed, all government bonds are at the long end of the yield curve and are in a bubble of their own making.
believes there is a lot of alpha for any macro fund to tap into.
"That is why I am so bullish on macro strategies during this period.
It's like buying long-only distressed managers at the bottom.
It doesn't matter when you buy because it is difficult to pick a loser," he
Alex Allen, chief investment officer
career at Barclay's Bank in Paris where he
was seconded for a one-year placement in 1994.
This was followed by an internship programme at Morgan Grenfell Asset Management.
He joined EFG Asset Management in 1997 as a hedge fund analyst, gaining exposure to all analyst disciplines.
In 1999 he became the fund manager for EFG's hedge fund range.
Allen held a seat on EFG's asset allocation committee, overseeing tactical and strategic capital allocation across alternative and traditional asset classes.
FUNDAMENTALS OF EDDINGTON MACRO OPPORTUNITIES FUND
Name of manager: Alex Allen, chief investment officer