The Dow Jones Industrial Average was down more than 40% from its highs in recent weeks and unemployment has hit a record high. Over 10 million unemployment claims have been filed over the past two weeks alone. Businesses are shutting down, investors are losing their minds, and it’s anybody’s guess what lies ahead for the markets amidst an unprecedented economic shock in its very early innings. That being said, one young money manager claims to have a fool-proof strategy for both the corona market and every other market just the same; And, as of now, the numbers are backing up his story. Contrary to the broader market tumult, Adam Ibrahim’s 365 fund has reported a maximum loss of only 3%, despite having significant exposures to US Equities, High Yield Corporate Debt and Energy, which were among the hardest hit assets in the crash.
In a similar move to that made by famed Hedgefund Manager Bill Ackman, hedges held by Ibrahim’s firm were able to almost completely offset the mark-to-market losses on core assets through the rapid pullback in the major indices.
365 holds a diversified portfolio of domestic and global assets such as Equities, Commodities and High-Yield Corporate Debt, and employs risk management strategies utilizing low and no-cost derivatives that generate outsized value in extreme events. As a result, 365 has held steady through the current market volatility that has left many others devastated.
Ibrahims fund was not, however, built on decades of experience, but rather as a liquid alternative for institutions and high net worth individuals with heavy allocations in illiquid assets, such as brick and mortar real estate, single name bonds, and private equity investments, to which Ibrahim sees 365 as complementary. “There is nothing wrong with being invested in illiquid assets that are stable and, ideally, have a strong carry profile. That being said, when exposed to those assets, it is also important to have significant liquidity on hand in order to service those investments and maintain the ability to pursue emerging opportunities. The 365 approach is about having a place to park that liquidity in a low volatility strategy that also has a relatively strong, diversified carry profile”.
Ibrahim, who is just 27 years old, got his start buying real estate after college on behalf of himself and a handful of institutional and high net worth clients. Since 2014, Ibrahim has acquired over 50 properties and established a vertically integrated firm to oversee the assets. His New York and Miami based real estate investment platform delivers institutional and accredited investors transparent and secure exposure to high-yield multifamily real estate assets in secondary and tertiary markets throughout the United States. Upon experiencing the illiquidity of real estate investments and seeking more diversity, 365 was established to serve as a better place to park sidelined cash and market investments.
The 365 strategy is positioned to track gains in most asset markets while mitigating losses in events of extreme economic shocks and disasters. The result is a portfolio that captures market growth on a lower risk and volatility profile while preserving liquidity for institutions and high net worth individuals during critical periods, such as that of the current Coronavirus pandemic and the accompanying market uncertainty. Instead of focusing on short-term, high-risk trades for rapid gains, Ibrahim strives to protect institutional and high net worth clients from extreme events while maintaining a strong long term portfolio that tracks asset markets well in bull markets. “If your strategy is heroic in times of distress, but only makes money once every 5 or 10 years, it’s going to be tough to hold on to clients and your sales cycle may also be long enough to raise a teenager. It is important to be protected, but also to be preserving and growing value during the vast majority of the time when markets are trending up”
Ibrahim, in his late twenties, explained the name behind the fund. “365 is an all-weather strategy. It is not about trying to predict the future, but rather building and maintaining a portfolio of liquid asset holdings that benefit from the widest variety of potential economic outcomes, especially the extreme ones that nobody expects.”
In politics there’s a saying, “Never let a tragedy go to waste.” Ibrahim understands this unique time and plans on capitalizing on the opportunity. “Moving forward, we will look to add more exposure to viable assets that are priced attractively while attaching robust risk management to our holdings for the event that things deteriorate further.”