Wealth & Finance August 2017

Wealth & Finance International 16 Strong Risk-Adjusted Returns hird Friday Total Return Fund, L.P. is available for accredit- ed investors, who can invest a minimum of $250,000. The Fund does not employ leverage and does not take a view on market direction. Excess collateral is invested in a diverse portfolio of income-generating securities. Michael Lewitt serves as CEO/ CIO at Third Friday Management, and is also the manager of the Fund. Michael is keen to start the interview by telling us more about the Fund in question. “The Fund sells at-the-money straddles on the S&P 500 Index, on a three-month rolling basis and hedges those positions with out-of-the- money puts and calls. Each straddle is hedged independently and the hedges are adjusted throughout the cycle, to maximise profitability or minimise losses. At all times, the Fund focuses on protecting capital and ensuring that the first two months of the sequence are fully hedged. “The strategy was initially developed in the 1990s and managed in separate accounts. The Fund was started as a family partnership and offered to outside investors for the first time in 2012, when I joined as the general partner. Since 2012, the Fund has grown significantly, while continually working to improve its investment strategy. “The Fund is available for US investors through a Delaware LP and non-US investors, through a Cayman Islands entity. The Fund has never had a money-losing year and was slightly positive in 2008. In addition to strong and consistent nominal returns, the Fund’s risk-adjusted returns are particularly strong with low correlation to the S&P 500, a high Sharpe Ratio, Sortino Ratio and other impressive risk metrics.” Michael then underlines the unique aspects of the Fund’s strategy, that is the three-month structure of the options, which means that rare losing months coincide with widening options premiums. “When a losing straddle rolls off, the Fund can sell a new straddle three months out at a wider premium. This sets up the Fund for higher profits and rapid recovery of losses in the following months. Thus, it is very difficult for the Fund to suffer large sustained drawdowns or losses – a unique feature of the strategy that sustains strong risk-adjusted returns over long periods of time.” Michael is also the editor of The Credit Strategist, a financial newsletter that is widely read around the world, and is recognised as one of the few investors to correctly predict the 2001-2 credit crisis and 2008 financial crisis. He is the author of two well-regarded investment books, The Death of Capital (2010) and The Committee to Destroy the World (2016). Mr. Lewitt is a long-time critic of the mainstream financial media and consensus policymaking thinking and uses his writing as an integral part of his investment process, to formulate independent views that have produced top tier performance for his clients, over the last 25 years. Mi- chael is also editor and publisher at The Credit Strategist, a position he has held since January 2001. The Credit Strategist is a monthly newslet- ter that has focused on the global economy and financial market since 2001. It is known as one of the few publications to predict both the 2001 and 2008 credit crises. The web site is www.thecreditstrategist.com . Michael is keen to tell us a bit more about his background in the indus- try, as the interview ends. “I have spent the last 25 years in the securities industry and the last 20 years in the investment business. In October 2012, I formed The Credit Strategy Group, a registered investment advisory firm, where I manage several credit-oriented hedge funds and separate managed accounts, for both individual and institutions. I continue to write and publish The Credit Strategist, which I view as an essential tool in formulating my investment ideas and strategies. “I co-founded Harch Capital Management, LLC (HCM) in 1991 - where I managed separate accounts, hedge funds, collateralised debt obliga- tions and mutual funds - focused on below investment grade debt for institutional clients and high-net-worth individuals (HNWI). I successful- ly invested in both the long and short sides of the debt markets during this period. Over my 20 years at HCM, I led an investment team, that generated consistent market-beating returns. “I was recognised in the Financial Times - as having been one of the few investors and strategists to forecast the financial crisis of 2008 - and predicted the credit crisis of 2001-2002. This allowed me to protect my clients from the large losses that hit many credit funds during those periods. I also serve as a regular financial columnist for the Spanish newspaper El Mundo and have written for The New York Times, The New Republic, Trusts & Estates and other publications. “In May 2010, l published The Death of Capital: How Creative Policy Can Restore Stability (John Wiley & Sons), which was received favour- able reviews and was included as part of the curriculum in economics and history courses at the University of Michigan and Brandeis Univer- sity, during the 2010-11 academic year.” Third Friday Management, LLP is the investment manager of The Third Friday Total Return Fund, L.P. The Fund was founded in May 2007 and follows a proprietary rules-based market neutral options strategy, designed to generate strong risk-adjusted returns in all market environments. We interviewed CEO/CIO at Third Friday Management, Michael Lewitt, following his success in achieving the Hedge Fund Manager of the Year accolade. T 1707WF09