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Campbell & Co. Preps $100 Million Market Neutral Fund Spinout

With global markets at rich valuations and investors seeking protection from a possible downturn, the managed futures firm is launching its equity market neutral strategy as a separate entity.

Campbell & Co., a 46-year old quantitative asset manager based in Baltimore, is spinning out an equity market neutral portfolio from its multistrategy fund to capitalize on investor demand for protection in the event of a stock market correction.

The new spin off, called Campbell Quantitative Equities, will manage $100 million in assets. It has returned more than 8 percent annually over ten years, according to a person familiar with the fund’s performance. Using a master-feeder structure, Campbell also will be able to continue to offer the market neutral strategy as part of its larger multistrategy fund. 

Quantitative funds have enjoyed fresh popularity over the past few years, with assets reaching $1 trillion. But investors also have plowed money into equity market neutral funds, with assets in that strategy increasing from $26 billion in the third quarter of 2013 to $98 billion at the end of the third quarter of 2017, according to research firm BarclayHedge. Equity market neutral funds are designed to make money in both up and down markets by employing long and short positions — buying stocks hoping their prices will rise and shorting stocks betting on price declines.  

“There’s an industry expectation that after a bullish equities run a market correction occurs — but when is always an unknown. And as institutional investors prepare for this shift in the markets, they are reconsidering recent biases towards passive, buy-and-hold equity exposure,” says Michael Harris, president of Campbell & Co.  

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Campbell, which manages $4 billion in assets, is also launching Campbell Quantitative Equities as part of a larger plan to develop more specialized funds as investors move away from all-in-one funds and opt for more narrowly defined strategies that they can piece together more precisely in their portfolios. 

According to the person with knowledge of the fund, Campbell will constrain assets in the market neutral strategy to $1 billion, with $500 million allocated to Campbell Quantitative Equities and the remaining $500 million reserved for the multistrategy fund. 

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