INVESTMENT OBJECTIVE

The Fund seeks returns, higher than the world’s equity markets, without greater risks of loss, applying protection strategies. The Fund strives to trade the most diversified futures portfolio possible.

INVESTMENT APPROACH

The Fund applies a Global Macro Strategy meaning, A hedge fund strategy that bases its holdings – such as long- and short positions in equity, fixed income, currency, and futures markets – primarily on overall economic and political views of various countries (macroeconomic principles).

The model is a short-term volatility break-out driven system with multiple filters that applies strict risk management principles, all of which are thoroughly back-tested.

  • Research Driven: The Fund attributes its exceptional success to superior research methods. Model testing is robust with very few degrees of freedom. Proprietary statistical techniques are examined including analysing multiple period subsets, market-by-market, sector, and risk/reward analysis, and many others. An independent research team develops and tests systems, cross-check all results using different research platforms.
  • Value Orientation: This research is intended to enable Caveat Hedge Fund Portfolio to offer superior fundamental value. A robust Top- Down approach allows a thorough analysis of the market from the big picture all the way down to individual stocks.
  • Share Selection: The Fund applies a systematic approach blending long-term and short-term trend following, momentum and mean reversion strategies. Each strategy is divided into subsystems tofacilitate smoother entries and exits.

Filtering techniques are applied, to avoid trades with adverse risk/reward characteristics. While the filter’s goal is to capture profits, its selectiveness allows the system to enter markets only during periods when the risk/reward of a trade is heavily in the trade’s favor. The filter could even avoid trades with positive profit expectations if unacceptable risk characteristics exist.

Caveat Fund Ltd starts with a Macroanalysis followed by a Microanalysis.

Macroanalysis: The Global View

  • Economy Health: – Firstly, the world economy’s health is determined. be mindful of what is currently affecting each region of the world.
  • Analyse the Trends: – Secondly, we determine whether the corresponding stock market is in an
    uptrend and worth analysing. This assists us to discover the countries that match our wants and needs.
  • Economy: – Thirdly, we examine the economic numbers such as interest rates, inflation, employment,
    etc. which will prove the current market strength.
  • Macroanalysis: – The final step is to analyse the major stock indices such as the S&P 500 and NASDAQ. Both fundamental and technical analysis will assist to determine the health of the indices.

The macro approach helps to determine the asset allocation. If the results are bullish, there is a good chance most of the investment-worthy assets will be from the equities market. On the other hand, if the outlook is bleak, the allocation will shift its focus from equities to more conservative investments such as fixed income and money markets.

Microanalysis: The Sector View

The Micro approach analysing the pros and cons of specific sectors (i.e. health care, technology, and mining),
which will narrow the search even further. After the entire amount of information is processed, several sectors should rise to the top and offer the best opportunities.

This final phase of the top-down approach can often be the most intensive because it involves analysing
individual stocks from several perspectives. At this point, the individual stocks are chosen, and the buying
process begin.

CURRENCY MANAGEMENT

Exchange rate fluctuations significantly influence global investment returns.

  • Base Currency: The base currency is USD (United States Dollars) or such other currency as the Directors shall determine from time to time. Investment statements are in USD (United States Dollars).
  • Global Major currencies:Caveat Global Hedge Portfolio is highly skilled in understanding the interaction between the global major currencies (USD, GBP, Can $, Euro, Swiss Franc, Jap Yen, Aus $, Mex Pesto). These form part of our devoted research and analysis strategy, which are part of our discretionary growth generation. We effectively use the short- and long-term trend fluctuations of these currencies to the benefit of investors. The Fund’s currency deployment frequently differs from the geographic deployment of its equity selection.
  • Digital Currency: Caveat is licenced and authorised to offer and support any digital- or crypto currencies and defined as:

All digital assets that are sold, designed, or used as a virtual medium of exchange using cryptography to secure the transactions.

All blockchain-based digital tokens, whether created using the Ethereum platform or not, that are sold, designed or used as utility token, access token or rewards token, including tokens which provide holders with the present or future ability to access a system or perform a function; and all other peer-to-peer electronic digital assets represented on a decentralized network, including digital tokens sold pursuant to an initial coin offering that are exchangeable or represent a digital asset represented in (a) or (b) above.

  • Digital Arbitrage: The directors may utilise the services and expertise of digital specialists to create additional protection and advanced growth opportunities. Through arbitrage profits are generated through the price movement and inefficiency in the Crypto to Crypto and Crypto to Fiat (Euro/ZAR) money markets.

Trading is not applicable on the market price movements or fluctuations but specifically on the price differences created within the different digital exchanges throughout the world. Utilizing these price differences between the different exchanges creates risk-free profits, net of costs.

PORTFOLIO HEDGING

Caveat Fund Ltd. effectively applies exchange-traded derivatives to offer investors positive returns. In doing so, the Fund purchases or sells exchange-traded derivatives, for example futures and options, if the analysis proves it to be in support of positive returns, consistent with the Fund’s investment objective.

The main risk of investing is that the selected equities prices will decline if stock markets fall or fluctuate.

To reduce the risk the Fund applies full expertise and mandate, maintaining a substantial level of hedging. Hedging strategies are most effective when over valuations in the market occur and vulnerability presents itself within the market. The manager’s actions are not limited which means that 100% hedging strategies could be applied however, the manager could also be 100% out of the market.

In combination with the hedging strategy, effective protection strategies are applied, as explained under “Risk management” Hedging strategies and applications are described under “Investment Approach”.