Zoran Vojvodic, manager of the $47.9-millionAGF Managed Futures, took an unlikely path into money management. Armed with a bachelor of science degree in physiology when he graduated from the University of Toronto in 1987, he went to work as a laboratory assistant. But he found the work tedious, and much of his time was spent writing grant proposals rather than making exciting scientific discoveries.
Bored and disillusioned, in 1989 he took a job as an underwriting assistant in Toronto for Constellation Assurance. As he learned more about the funding of insurance obligations, his eyes were opened to the world of investment opportunities. "I noticed there was a significant mathematical and scientific component in technical analysis of financial markets," says Vojvodic, a portfolio manager at AGF Funds Inc. "I saw the market as a puzzle. I could apply problem-solving tools from my training in math and physics to determine direction, and I became interested in trading."
In 1990, he moved to Manulife Financial Corp., where he worked as a pension analyst, before joining the client services department of Mackenzie Financial Corp. in 1991. He left to join AGF's client services department in 1995.
By this time he was actively trading financial futures and options tied to stock indices, currencies and debt markets for his own account. He also read voraciously about financial markets, and obtained his chartered financial analyst (CFA) designation in 1999.
"I was fascinated by futures and options and the concept of using leverage to augment returns," he says. "I wasn't interested in individual stocks. They didn't offer the kind of swings and volatility that I enjoyed."
Vojvodic became a close observer of AGF Managed Futures, managed at that time by an outside manager, John Di Tomasso. Revealing his interest in futures and options to AGF, Vojvodic suggested he could achieve superior results. He was given a job as a derivatives analyst in the investment department, and in March 2002 he formally took over the fund.
The alternative strategies fund invests in derivatives whose underlying assets are physical commodities such as gold, silver, grain, oil and cocoa. It holds no financial futures and is therefore not at all correlated to stock and bond markets, making it a pure diversification vehicle, Vojvodic says.
"Commodities are just coming out of a long downturn that began in the early '70s and ended in late 2001," he says. "The longer-term supply/demand picture is bullish. A lack of infrastructure spending and increasing demand is setting the stage for shortages in grains, cotton, base metals and energy. There may also be unexpected supply shocks due to weather, war or terrorism."
Launched in May 1995, AGF Managed Futures had its best calendar year in 2002, mainly under Vojvodic, with a 71.7% return. Through the first 11 months of this year, it's up another 33.5%.
But like his predecessor, Vojvodic continues to take unitholders on a rollercoaster ride. The fund plunged 32% in October alone, its worst monthly loss ever, though it rebounded 20.1% in November.
"I have applied a much more active and aggressive strategy, consisting of a mix of short and long positions, as well as short-term and long-term time frames ranging from a few days to up to 18 months," Vojvodic says. "My strategy is designed to capture gains not just from trends in commodity prices, but also from short-term changes in the degree of price volatility."
Vojvodic concentrates on seven primary commodity categories: precious metals, energy, grains, base metals, industrial materials, livestock and the soft or "breakfast" commodities like coffee, cocoa and sugar. Within these categories, there are about 25 individual commodities, but he avoids the smaller, less liquid ones such as tin or orange juice. He won't expose more than a third of fund assets to any one category, or more than 15% to any one commodity, and at times he will avoid entire categories.
The fund requires constant vigilance to maintain the desired commodity exposures as prices fluctuate. For example, if Vojvodic wants 10% of fund assets exposed to gold, and the price of bullion goes up, he'll adjust his exposure to gold-related contracts.
He may need to reduce long positions, buy put options or sell short some futures contracts to reduce his overall exposure. He watches leverage carefully, making sure his margin exposure doesn't exceed the total value of fund assets.
"I'm high-energy and like the fast pace and constant change of commodities markets," he says. "It suits my personality much better than being locked away in lab where it can take years to examine one specific question."
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