Asymmetric Fund: Balancing Risk and Potential Returns

An asymmetric fund is a type of investment that aims to generate returns by exploiting market inefficiencies. This type of fund is designed to take advantage of situations where the potential upside greatly outweighs the potential downside.

By using a combination of long and short positions, an asymmetric fund can potentially generate higher returns while minimizing risk. For example, if a fund manager believes a stock will go up, they'll buy it, but if they think it will go down, they'll sell it short.

One of the key benefits of an asymmetric fund is its ability to balance risk and potential returns. By taking calculated risks, fund managers can potentially generate higher returns while minimizing the impact of losses. This approach requires a deep understanding of market dynamics and the ability to make informed investment decisions.

An asymmetric fund can be an attractive option for investors looking for a more conservative investment approach. By spreading risk across multiple positions, fund managers can potentially reduce the impact of any one investment going sour.

An asymmetric fund is a type of investment vehicle that allows investors to take on both long and short positions in a single portfolio.

It's designed to profit from price movements in both directions, not just a single direction like a traditional long-only fund.

The goal is to generate returns through a combination of long and short trades, which can help to reduce risk and increase potential gains.

By doing so, asymmetric funds can provide a more diversified investment approach that's less dependent on market direction.

Investment is a calculated risk taken with the goal of generating returns. It involves putting money into something with the expectation of earning a profit.

The Fund scours the market for opportunities that present infinite or significant upside potential. This is because asymmetric investment opportunities offer a greater margin of safety due to defined limited downside risk that can be hedged.

Investment involves working with attractive fundamentals to identify potential returns. The Fund uses industry experts, in-house bottom-up analysis, and hedging with financial instruments to tackle significant risk nodes.

A financial instrument is used to enhance or best express the Fund's expectation or view. This is done through a comparative process that identifies the most suitable instrument for the investment.

The Fund generates possible outcomes to test its investment hypothesis. This ensures that the correct steps can be taken if a negative outcome materializes.

The world of finance can be complex, but I'll break it down for you in simple terms. Asymmetric funds are a type of investment strategy that focuses on exploiting market inefficiencies.

They're not a new concept, with the first asymmetric fund launched in 2014. This fund was designed to capitalize on the difference between the market's perception of a company's value and its actual value.

Asymmetric funds often employ a combination of quantitative and fundamental analysis to identify undervalued assets. This approach can be beneficial in a market where prices are driven by sentiment rather than fundamentals.

One key aspect of asymmetric funds is their ability to generate returns through a variety of market conditions. They're not limited to a specific market direction, making them a more versatile investment option.

In an asymmetric fund, the goal is to maximize returns while minimizing risk. This is achieved by carefully selecting assets that have a high potential for growth and a low potential for loss.

Asymmetric funds are often used in conjunction with other investment strategies to create a diversified portfolio. This can help to reduce overall risk and increase potential returns.

By understanding the concept of asymmetric funds, investors can make more informed decisions about their investment portfolios. It's essential to do your research and consult with a financial advisor before making any investment decisions.

Risk management is crucial for an Asymmetric fund to minimize losses and maximize returns. The fund's portfolio/concentration risk is managed by ensuring no more than 20% exposure to any expected outcome at any point in time.

A key aspect of risk management is diversification, which helps to mitigate concentration risk. By spreading investments across different strategies, the fund reduces the risk of significant losses due to a single investment.

Liquidity risk is another critical aspect of risk management. The fund mitigates this risk by hedging positions with financial instruments that have greater liquidity compared to the underlying investment. This ensures that the fund can quickly sell assets if needed to meet investor demands.

Historical data shows that market recoveries can take significantly longer than drawdowns. The S&P 500's 2022 drawdown, for example, took 10 months to bottom out and 15 months to recover.

The ultimate goal of our asymmetric fund is to find and support the winners of tomorrow while profiting from the downfall of companies that destroy shareholder value. We focus on business models that are resilient to global risks, including climate change, technology, corporate structures, monetary policy, and politicians.

We use leverage to increase exposure to opportunities with high certainty and asymmetry, and to hedge the portfolio's exposure. This allows us to take advantage of shorter-term pricing discrepancies or arbitrage.

Our investment process involves understanding how an asset's risk and return are priced relative to cash, which serves as the risk-free rate. This is critical in evaluating risk-adjusted returns and building more resilient portfolios.

The Calmar ratio is a useful tool in representing this relationship between an asset's risk-adjusted returns and the level of return on cash. We use real-time numbers to illustrate this relationship, such as the S&P 500's 10% annualized return with a maximum drawdown of 50% over the last 20 years.

In the current market, the risk-free rate is high, forcing investors to take on more risk to generate the same excess return potential. This means that for every 1% earned above cash, an investor in the S&P 500 risks losing 10% of their investment.

Our fund targets 10% plus p.a. returns in an environment where equity market returns are negative or below money market returns. When equity market returns perform better than money market returns, we aim to outperform these returns.

Most investments, aside from cash, are skewed to downside risk.

A Calmar ratio below 1 denotes negative asymmetry, and greater downside potential.

In a perfect world, an investment would have all upside and no downside.

Traditional investments historically have a Calmar ratio less than 1.0.

The Calmar ratio reflects the symmetry—or asymmetry—of an investment’s upside vs. downside potential.

A Calmar ratio above 1 denotes a positive asymmetric return profile, meaning there is more upside than downside potential.

Data from Morningstar, as of June 30, 2024, shows that traditional investments have a Calmar ratio less than 1.0.

Asymmetric Capital Partners is an investment fund that targets business-to-business startups. They have a debut fund of $105 million, which was oversubscribed.

Their focus is on technology-focused startups, specifically in four areas: digitization of legacy industries, next-generation software and business tooling, marketplaces, and disruption of time and place leading to changes in work, retail, and healthcare.

The fund is jointly based in New York and Boston and invests in seed to Series C-stage companies.

Here's a breakdown of their investment activity:

Fees are an essential aspect of any investment fund, and it's essential to understand what you're paying for. The management fee is 1.5% of your investment.

The performance fee is tied to the performance of the fund, and it's based on a High-Water Mark, which means it only applies when the fund's returns exceed a certain threshold. There are different brackets for the performance fee, ranging from 0% to 30%.

Here's a breakdown of the performance fee brackets:

The sliding scale for the management fee is a great feature for early investors, as it lowers the fee over the first 3 years. This can save you a significant amount of money in the long run.

As an investor, it's essential to understand the goals of the investment fund you're considering. The fund targets 10% plus p.a. returns in an environment where equity market returns are negative or below money market returns.

The fund's approach is to find opportunities that present infinite or significant upside potential but with limited or defined downside risk that can be hedged, resulting in a greater margin of safety.

This means the fund is looking for investments that are resilient to global risks such as climate change, technology, corporate structures, monetary policy, and politicians. Strong business models are crucial in this regard.

The fund's ultimate goal is to create value by finding and supporting the winners of tomorrow while profiting from the downfall of companies that destroy shareholder value.

Here's a summary of the fund's target returns:

Asymmetric has a notable portfolio exit history, with a total of 4 exits. Their latest exit was EvolutionIQ, acquired by CCC Intelligent Solutions on December 20, 2024, for a valuation of $XXM.

One of these exits was EvolutionIQ, a company acquired by CCC Intelligent Solutions for a valuation of $XXM.

The other exits were acquired by unknown companies for an undisclosed valuation.

The history of investment funds dates back to the 19th century.

The first investment fund, the "Société Générale de Belgique", was established in 1832 in Belgium.

It was a closed-end fund that allowed investors to pool their resources and invest in a diversified portfolio of stocks.

The concept of investment funds gained popularity in the early 20th century, particularly in the United States.

The first open-end mutual fund, the Massachusetts Investors Trust, was launched in 1924.

This marked a significant shift towards a more accessible and flexible investment option for individual investors.

The 1970s saw the introduction of index funds, which offered a low-cost alternative to actively managed funds.

Index funds track a specific market index, such as the S&P 500, to provide broad market exposure.

Today, investment funds come in various forms, including mutual funds, exchange-traded funds (ETFs), and hedge funds.

Asymmetric has a total of 2 funds, including Asymmetric Capital Partners II. These funds are a great example of how investment firms can manage multiple funds simultaneously.

Asymmetric Capital Partners II is a fund that was closed on 4/8/2024. This means that the fund is no longer accepting new investments.

The Asymmetric Capital Partners fund has a significantly higher number of sources, with 10 sources listed. This could be due to its larger size or more diverse investment strategy.

Here is a table summarizing the fund histories:

Asymmetric Capital Partners has launched a $105M fund targeting B2B startups. This is their debut fund, which was oversubscribed.

The firm is jointly based in New York and Boston, and it invests in seed to Series C-stage business-to-business companies. They have four theses: the digitization of legacy industries, next-generation software and business tooling, marketplaces, and the disruption of time and place that lead to changes in work, retail, and healthcare.

The firm's founder, Rob Biederman, largely raised the fund during the spring and attracted investment from family offices and high net worth individuals who have private equity and venture capital backgrounds.

Biederman and his team have already gotten to work putting the capital to use in over a dozen startups. They are writing check sizes from $250,000 to $10 million and aim to co-invest with other firms.

Here are some of the startups they have invested in:

The firm's investments include recruiting platform Canvas, Firstbase, a remote work software and fintech company Clearco, and others.