Brian Singer could be one of the most powerful asset managers you've never heard of.
Before disappearing off the Wall Street scene in 2007, Singer headed the Global Investment Solutions outfit for UBS for over a decade, overseeing about a third of the firm's assets or about $258 billion across a series of portfolios he touted as unique to the Street.
"We sought to tear down the usual 'investment silos' and drive a wedge between long only and traditional hedge funds to create a series of one of a kind portfolios that drew on the key elements of both," Singer says of the operation.
But as early as late 2006, Singer saw the firm holding positions that were temporarily being rewarded by the low volatility/high liquidity environment and foresaw a full-blown crisis ahead. He says he left because he wasn't given the authority to effect the change he thought was needed.
"Part of the problem was the complex internal legal structure of derivatives contracts and other products like subprime and Alt-A packaged instruments," Singer says. "I didn't want to keep running portfolios that I couldn't appropriately manage."
Now he's staged his big comeback by launching a new hedge fund, Singer Partners, with plans to employ the same strategies he used at UBS to generate "superior returns" for the global investment bank.
Here's a look into the 20-year investment veteran's portfolio playbook — sans the typical 2 & 20 hedge fund fees:
Developed Equity: 46 percent
Emerging Equity: 14 percent
Total Equity: 60 percent
High Yield: +15 percent
Converts: +15 percent
Emerging Debt: +10 percent
Total non-government bonds: +40 percent
Gov't Bonds: -20 percent (short position)
Total Bonds/Cash: +20 percent
Singer says today's market is more range bound and well-suited for a macro strategy — one that's capable of taking advantage of a market now overly discounted from the effects of the financial crisis as well as the debt/future tax backlash it has unleashed.
"The equity markets were extremely undervalued in past months and still remain attractive on a 20 percent to 30 percent value/price basis," he says. "But there's a lot of money still on the sidelines because we're faced with the usual 'wall of worry' that occurs coming out of every cycle."
Like a true hedged investor, Singer plays the markets on both sides. He sees once-in-a-lifetime opportunities to buy high yield, convertible and emerging debt but also opposingly owns a 20 percent short position in Australian, European and Canadian government bonds, which he feels are somewhat overvalued.
He's game for the relative risks for the same reason he's knee-deep in equities: though the environment is certainly still cautionary for risky assets, Singer says more than enough bad news is already priced in.
The final piece in the portfolio pie is currencies. It's typical for managers to indicate how much risk they would incur relative to the portfolio's/client's base currency through currency exposures.
At the moment, Singer is sweet on the Swedish Kronor (SEK), Korean (South) Won (KRW), and the Taiwanese New Dollar (TWD).
In terms of his general outlook, Singer believes the worst is behind us but that the end of the recesion won't be declared until well after it has ended, just like the beginning was declared 12 months after it started.
"The economy likely bottomed in the quarter that just ended (Q2)," he says. "But the data will come in choppy for quite a while, during which time people will be able to paint any picture they want, from pessimistic to optimistic."