Understanding opportunity is what it takes to run a successful global macro fund. Kathleen Kelley, founder and chief investment officer of Queen Anne’s Gate Capital Management in New York, understands that concept better than most.
Her first opportunity came when she was an economist at the Federal Reserve Bank of New York, a position she traded for a similar one at Tudor Investments. It was Paul Tudor Jones who suggested she move to the trading side and thus Kelley made the best trade of her career.
“It was Paul Jones who said to me, ‘You know, you should move over to the trading side,’ so I moved over and for the last six years that I was at Tudor, I ran a portfolio in macro. At that point, we could do anything except equity, so it was commodities, fixed income and FX,” said Kelley. “Paul was still very involved in the commodity markets, so I learned commodities by sitting outside of his office.”
Kelley’s next career trade took her to Vantis Capital in 2001, a long/short equity hedge fund, where she brought in more macro themes. She then moved to Kingdon Capital, which was long/short, but had sector allocation portfolio managers. Kelley was brought in to add a macro allocation, with a stronger focus on commodities as an instrument to implement the macro view.
Next came a personal year living in London with her three children, where she planned her biggest trade — launching her own global macro fund, Queen Anne’s Gate Capital Management.
We caught up with Kelley to get her views on the markets, starting a fund and her experience working with the proverbial “smartest guys in the room.”
FUTURES MAGAZINE: Introduce us to your new fund. What do you trade and how do you make your decisions?
Kathleen Kelley: We are a discretionary macro fund with a commodity focus. We take our macro view and implement it in the commodities phase because we do micro supply/demand analysis for each commodity so we can bring together macro and micro and then we have an investable idea. That’s the best situation for us.
We have a framework for evaluating these markets that has been developed over the last 20 years. We look at what happens with high prices and in commodity markets, but other markets as well. [Because] that tends to lead market prices to change their behavior so producers produce more of it, consumers consume less of it with record high prices and with record low prices you have the opposite. So we are constantly looking at the impact that three- to six-months out for high prices or low prices in certain markets will have. That’s how we look at the world. And we are looking for the inflection points that are almost always brought about by these strong directional moves in price.