CHICAGO (HedgeWorld.com)–Commodity Trading Advisor Kottke Associates LLC launched its first long/short equity hedge fund on Oct. 1 with US$1 million in proprietary capital.
The Kottke Equity Long/Short Value Fund LLC is being offered through Kottke’s Eisner Funds Management Division, which is managed by Scott Eisner, who joined the firm earlier this year.
Mr. Eisner is using an investment approach in which portfolio decisions are made quarterly and are solely based on the balance sheet and income statements as contained in the latest corporate Securities and Exchange Commission 10-Q and 10-K filings. Proprietary valuation formulas and GAAP interpretations are applied to the fundamental research process. Traditional measures such as price to earnings ratios and owners equity are completely discarded by the manager as being potentially misleading.
Twenty holdings on both the long- and short-side of the portfolio make for almost a market-neutral approach, Mr. Eisner said. But he doesn’t focus on creating a beta and sector neutral portfolio, he added. The review of the income statements of 110 companies on a quarterly basis drive his investment decisions, and the fund will conduct key trades four times a year.
For Mr. Eisner this is the first time he’s shorted stocks. Before working with Kottke, he traded long-only portfolios and worked on the financial and administrative side of brokerage and trading operations.
The fund is being made available to qualified investors and subscriptions will be closed at US$50 million, although the strategy was designed to handle about US$100 million, Mr. Eisner said.
For Kottke, this is the firm’s second hedge fund launch. In July, the firm launched an agricultural arbitrage fund. The fund began trading in September with US$2 million in fund assets. The firm trades grain contracts and makes market bets on markets such as soybeans, corn and wheat. A typical arbitrage may take advantage of the spread between soybean meal and soybean oil or other grain derivatives, which sometimes can be pretty wide. About 95% of the trades are completed on the Chicago Board of Trade.
Kottke is registered with the National Futures Association and manages US$80 million in hedge funds, commodity pools and separate accounts. The service providers for the new offering are Spear, Leeds & Kellogg as prime broker and Gleeson, Sklar, Sawyers & Campata LLP is the fund’s auditor.