Ex-Deutsche duo Gavin Vorwerg and Murray Winckler are clocking up solid returns with their Laurium Capital offshore portfolio, which builds on their domestic South African long/short strategy based on detailed fundamental analysis.
The sub-Saharan offshore portfolio has a slightly wider mandate than the domestic fund, allowing for investments in sub-Saharan Africa (ex-South Africa) and including preference shares, high-yield bonds and convertibles.
It launched in December 2008, with Bermuda-based South African Alpha Capital Management as the investment manager. The fund has gained a net 24.3% in dollar terms in the past 10 months, including 1.3% in September.
Laurium’s domestic portfolio has also had a strong start, returning 15.1% in its first 14 months since August 2008, against a 10% decline in the Johannesburg Stock Exchange over the same period. It rose 0.4% in September.
The portfolios typically have 15-25 long positions and 15-20 shorts, including leverage and derivatives to add alpha and reduce volatility. The investment process is based on a macro overview, with stock screening using financial and relative value analysis.
Laurium is now looking to grow assets with a good track record in place. Winckler says the offshore fund benefited from exposure to high-yield corporate bonds earlier in the year, as well as some positions in Zimbabwe, which account for less than 5% of assets. The onshore equity strategy is replicated in the fund, with rand performance hedged into dollars.
Vorwerg and Winckler have strong pedigrees from their time at Deutsche. Before forming Laurium, Winckler was CEO of Deutsche Bank South Africa from 2005 to 2006, while Vorwerg spent three years at Deutsche Bank London in the strategic equity structuring group, covering Africa, the Middle East, and central Europe.
Winckler was previously Deutsche’s head of global markets (equity and debt, including fixed income, foreign exchange, commodities and money markets) and also had a five-year stint from 1999 to 2004 as MD of Deutsche Securities. From 1995 to1999, he was head of research and a top-rated analyst in various sectors. Vorwerg was at Deutsche Securities from 2003 to 2005, responsible for equity structuring and derivatives. From 1998 to 2005 he was an equity analyst, top-ranked in several sectors from 2000, and was Deutsche’s deputy head of research from 2003, joining the equities executive committee.
Laurium has also added to its team, with Kevin Shein and Paul Robinson, previously analysts at hedge fund Ralk Capital, joining earlier this year. It also has a joint venture with ex-Deutsche pair Craig Sorour and Sven Thordsen, who launched the market-neutral Bell Rock Fund this year.
Laurium believes that global markets are over-extended in the short term, and a correction of 10-15% would be welcome. That said, it thinks that equity markets will be well above current levels in 12 months’ time, underpinned by cash on the sidelines that has not participated in the 2009 rally. The South African economy is, however, lagging the global recovery, although Laurium expects GDP to rebound to above 2.5% in 2010.
The managers are currently adding risk to the portfolios as volatility settles, taking longer term fundamentally driven views on the relative performance of stocks within sectors. – Oct 2009
