FAQs

  1. What is the goal of the BDRRS?

The goal of BDRRS is to maximize real returns for our investors while minimizing the risks of capital loss due to market movement and the loss of purchasing power due to local inflation and currency fluctuations.  Our business model is built upon the interests we share with our clients

  1. What are real returns?

We consider real returns to be the returns investors achieve after subtracting inflation from the nominal return.  Inflation reduces returns; it erodes investor’s capital. We explicitly build and manage our strategies with the aim of maximizing real returns.  Doing so preserves investor’s capital in the long term.

  1. Is BDRRS an inflation-protected strategy?

BDRRS’s objective is to maximize real returns while limiting the loss of purchasing power due to inflation, and is therefore not an inflation-protected strategy. 

  1. Is BDRRS a capital-protected strategy?

BDRRS’s objective is to maximize real returns while limiting drawdowns, and is therefore not a capital-protected strategy.  Capital-protected strategies cannot always fully protect capital as they are exposed to real counterparty risk.  Blue Diamond effectively minimizes counterparty risk by using exchange-traded instruments.  Blue Diamond offers no explicit capital protection or performance guarantee.

  1. How does Blue Diamond measure inflation?

Blue Diamond measures inflation in local terms, which we consider to be the terms most relevant to an investor.  For example, in the Swiss Real Return Strategy (CHF), we use Landesindex der Konsumentenpreise (LIK).

  1. Does BDRRS invest in traditional inflation-protected assets like TIPS?

The BDRRS strategy utilizes traditional equity and fixed income assets and some global commodities to generate the real return.  BDRRS has the ability to hold TIPS, but would do so only if they were deemed inexpensive from a valuation perspective.  BDRRS would not use TIPS as an inflation hedge.

  1. Why do we focus on currency fluctuations?

BDRRS consists of a global portfolio with assets denominated in several different currencies. We believe that the performance of investments in foreign assets should be assessed two ways: the first on the performance of the asset and the second on the performance of the currency.  Currency rates can substantially improve or detract from the total return of the asset.  BDRRS attempts to minimize the impact of currency fluctuations on the portfolio.

  1. Give me three reasons someone should invest in BDRRS?

While there are many reasons to invest in BDRRS, we believe that these three separate us from our peers

    • We meet the real needs of investors by explicitly focusing on real returns in the appropriate base currency and as measured against the relevant local inflation index.
    • We provide genuine portfolio diversification.
    • We are a locally based and owned asset manager that uses an understandable, transparent investment process.
  1. What does BDRRS invest in?

BDRRS currently has the ability to utilize liquid, daily tradable index products and futures contracts.  BDRRS does not invest in individual stocks or credit bonds to implement investment decisions.

  1. What is strategy’s target return?

The target return for the strategy is CPI+5%

  1. What are the management and performance fees?

BDRRS charges a management fee of 0.80% and a performance fee of 15% of performance above CPI (see prospectus).

  1. How does it fit into my portfolio? (Alternative? Hedge fund?)

We believe that investors should view BDRRS as a core allocation due to its low drawdowns, low correlation with other traditional strategies, and modest return objectives.

  1. What safeguards are in place to protect investors?

BDAM is registered with the VQF Financial Services Standards. BDAM has also filed for registration with the FINMA (Swiss Financial Markets Regulatory Supervisory Authorities) to become a Swiss regulated investment advisor.  

BDAM uses only best-in-class third party partners that act independently of BDAM to protect investors’ interest.  We currently use:

  • Banque Cantonale Vaudoise as custodian
  • 1741 Asset Management AG as the fund administrator
  1. How can qualified investors invest in the BDRRS?

Qualified investors (according to Swiss law) seeking Swiss franc-denominated real returns can invest in the Swiss Real Return Fund (CHF).

  1. Please describe the investment process of the BDRRS?

BDRRS’s investment process is founded on fundamental investment insights; combines proprietary valuation and momentum processes, etc. Please also refer to the Blue Diamond website for more details www.bd-am.com

  1.  Please describe how BDRRS measures and manages risk?

While our approach to risk and risk management is quite understandable (as we define risk in terms of price), the way we measure and manage risk is best explained in the context of our overall investment process and our approach to portfolio construction. It is best to pass on the question and refer the question to us. Here, too, we’ll follow up and provide the answer. You can also point them to the website (www.bd-am.com).

  1. Where can I find more information on Blue Diamond and the BDRRS?

For more information on Blue Diamond and the BDRRS please refer to our website (www.bd-am.com) or contact us directly.

  1. Can the BDRRS be classified as a global macro strategy?

Like other global macro hedge funds, BDRRS is an unconstrained top-down investment strategy that uses multiple, disciplined investment processes to take/establish long or short positions in equity, fixed income, commodity, and currency markets using liquid and typically listed securities and derivatives. However, unlike all other global macro strategies, BDRRS adopt a specific normative return target: CPI (expressed by the appropriate local measure of inflation), not LIBOR or some other risk-free rate.   We adopt this target because our goal is to provide real value to investors by consistently maximizing real returns, not simply outperforming a nominal benchmark.  Our performance fee is pegged to our performance above the inflation benchmark.

  1. Can the BDRRS be classified as a GTAA strategy?

While the BDRRS might have some of the same characteristics as a GTAA strategy, like the ability to trade the same markets, implement with similar instruments, go long and short, and use investment processes used by some GTAA strategies, we are not a global macro because of two defining characteristics:

  • BDRRSs objective is to consistently maximize real returns.
  • BDRRS imposes several explicit constraint to achieve this objective (namely, a specific inflation benchmark dominated in a specific currency).

GTAA strategies typically seek to enhance investment outcomes by over/underweighting asset classes based on their expected performance over relatively short time periods (usually 3–6 months). They are often used as an overlay to capture excess return through timing bets or to strategically rebalance an asset allocation that might have unintentionally drifted from its target allocation.