Dix Hills Partners : DHP Absolute Return Strategies

Summary

Dix Hills Partners’ investment strategy is derived from extensive research on up to 50 years of interest rate movements in the largest global sovereign debt markets. Our investment philosophy is based on the idea that the near-term direction of interest rates may be predicted through the systematic integration of views on the macro economy (what the market should do), valuation metrics (what the market can do) and technical indicators (what the market wants to do). Over time, we’ve produced a positive alpha 60-65% of the time on a month-by-month basis. In addition, our gains in positive months are greater than our losses in negative months. Our track record includes many disparate interest rate, financial and economic environments – including tightening cycles, easing cycles, the great financial crisis and the more recent episodes of “ZIRP and QE”. While not a guarantee, our success over this dynamic period gives us confidence in our potential to continue to product positive alpha in the future.

Investment Strategy

We trade exchange traded futures in the four most liquid sovereign debt markets (US 10 Year Treasury Note, German Bunds, UK Gilts and Japanese JGB’s) to help ensure high liquidity with minimal credit and counterparty risk. Our fundamentally-based investment process is designed to generate absolute returns regardless of the direction of interest rates, and to have a net zero duration exposure over time. Our alpha has demonstrated virtually no correlation to most major traditional and alternative benchmarks or assets classes. Thus, blending our strategy with other programs may often improve the initial portfolio’s risk-adjusted return as well as its absolute return characteristic.

Risk Management

Our risk management principles and approach are fully imbedded into our investment process, strategy, instruments traded and overall portfolio design. We seek to mitigate those risks such as credit, liquidity, operational and counterparty risks, so as to best isolate the movement of interest rates from fundamental, valuation and technical reasons.