BEVERLY HILLS, Calif. (HedgeWorld.com)--Recently formed Wahab Capital Management is gearing up for its hedge fund debut in early October.
The U.S.-based long/short WCM Strategic Fund will be run by Norman Wahab, a portfolio manager who has been trading his own proprietary accounts since 2000. Prior to that, Mr. Wahab had worked for Morgan Stanley and Prudential Securities.
The new fund will have a portfolio of about 20 equity positions, including both longs and shorts. Security selection is based on a combination of qualitative and quantitative analysis, taking into account technical factors. Rebalancing, an event that will likely occur monthly, is also important to the portfolio.
"Not enough fund managers pay attention to rebalancing their portfolios, which can produce a situation where core positions get bigger and bigger over time," Mr. Wahab said. "The fund won't be market neutral in the strictest sense, but without regular rebalancing it is difficult to stay hedged," he said.
Mr. Wahab is also considering an offshore version of the strategy.
Although the new Wahab fund is not a sector fund, Mr. Wahab said he expects, in early trading, he will find an ample supply of shorting opportunities in the biotech sector. "My analysis shows that the sector has roughly 72 leaders of which less than half have satisfactory earnings and many of the rest are swimming in debt," he said. "The good ones are reducing debt, but some won't be rebounding anytime soon. In the end, you may have 10 leaders in that sector that don't fall into that group. So there are plenty of shorting opportunities," Mr. Wahab said.
Wahab Capital Management was established as a Delaware limited liability company. The firm is a member of the NASD and is a registered investment adviser in the state of California. Mr. Wahab, who is half Native American, said he is in the process of having the firm certified as a minority-owned business.