GAA Global provides haven from euro crisis

The current crisis in Europe has created issues affecting confidence for investors all over the world.

Equities have felt the full brunt and have been beaten down to historic lows, making it a good time to look westwards for investment opportunities. Since the beginning of October, US stocks have rallied 14 per cent, having hit a year-low on the third of the same month.

Retail sales have increased, which has helped consumer confidence, while net income has also grown by 15 per cent, giving rise to an 11 per cent increase in sales for the 437 companies within the S&P 500. US banks are now seeing their share of positive news, with both Citigroup and Bank of America reporting gains.

A possible outlet for investors to look into is the GAA Global USD ‘Q’ fund. Global Asset Allocation is a risk management strategy that uses an underlying quant trading program to select funds from a database. This is then managed and traded on a month-to-month basis so that the investor will either make money or lose money at the end of every month.

The company itself is still relatively young – operations began in 2004 – and its database has a total of 38,000 stocks from 52 global stock markets, where an algorithm selects the stocks that are expected to outperform.

Since the company’s launch, the GAA fund has produced a return of 140 per cent, compared with 27 per cent from the MSCI World Index over the same period.

The fund works by purchasing stocks deemed to be undervalued and with a large potential for growth. This is useful for balanced investors due to its month-to-month strategy. The fund is also priced every month, although its strategy of cashing out of every holding to buy back every month means it nonetheless remains liquid.

In an effort to provide some protection in a falling market, the fund hedges the components of the MSCI World Index by buying "put" options on the component indices. Even though statistics show that there are periods where the fund will lose money for a consistent two-to-three month period, it still regularly bounces back and is able to close at a yearly positive.

Monthly losses and gains tend to range between two-to-five per cent on average so investors will not likely be subject to high risk and high volatility measures.

GAA has consistently outperformed the MSCI World Index on a yearly basis since 2005, and although statistics do not point towards it continuing the trend this year, overall gains are expected during the next three-to-six months.

Abhishek Madarasmi is a portfolio analyst at Platinum Financial Services. The views expressed here are his own.