CONFERENCE SPONSORS
III Associates
III Offshore Advisors and III Associates (collectively “III”) have been managing investor capital using fixed income arbitrage trading techniques since July 1982. III currently advises investment funds and accounts with approximately $2.2 billion in capital. In 2005, III began trading its first stand-alone relative value credit fund, and III now manages additional credit funds that employ long-short and long only investment strategies. III is responsible for all aspects of investment and trading activities for the III family of funds, including asset selection and allocation of assets among different strategies employed, collateral/margin and cash management activities as well as risk management, compliance and clearing management/trade settlement.
III’s market neutral rates strategy focuses on isolating spread anomalies in high quality fixed income securities from G-10 economies and their derivatives and then structuring hedged positions, often through “defined risk’ constructions that may yield positive carry, convergence gains and/or capture low-cost long optionality. III generally will hold a diversified portfolio of 20-30 fully hedged positions at any one time. III seeks to minimize and control interest rate (market) exposure by constructing investment positions that have a minimal net duration. III also hedges away any first order FX exposures, where present. A significant portion of capital is held in cash equivalents for liquidity and risk mitigation purposes.
III’s long/short and relative value credit trading strategies make use of well-developed relative value analytic methods to identify opportunities in credit derivative markets and structure positions in an attempt to exploit perceived credit mis-pricings by acquiring assets identified to be undervalued and by selling assets which III believes are overvalued and are likely to have a catalyst that will cause a near-term re-pricing. When prices are not dramatically out of balance, III will structure market neutral positions to arbitrage relative value price anomalies. These positions may be relative value or directional, depending upon the current phase of the credit cycle. Some basic examples of relative value positions are index construction and deconstruction trades, index versus index trades, forward index constructions, index versus sub-index trades, bond versus credit default swap (“CDS”) basis trades, capital structure tranche versus alternative capital structure tranche trades, and underlying credit instruments versus particular indices. A significant portion of the capital is held in cash equivalents for liquidity and risk mitigation purposes.
III’s long only credit trading strategy differs from III’s long/short credit and relative value credit approach in that investments are made only in cash instruments and do not utilize leverage via repurchase agreements or other financing or leveraging techniques, nor does III’s long only approach to credit investing employ ISDA agreements or utilize derivatives traded under ISDA agreements (other than for occasional hedging purposes, such as to hedge non-USD instruments back to dollars). Performance is driven primarily by a combination of tactical allocation among credit market sectors and various credit instruments based upon III’s macroeconomic views, and by attempting to select the best available issuers and instruments or structures for investment within the chosen sectors, based upon III’s robust, bottom-up security level analysis. New investment positions would normally be established only when they are projected to have adequate liquidity, produce a positive carry, and have the potential to generate capital gains when the markets recognize the fair value of the instruments involved.
