HW:: What is the background to your company and funds?
RH:: Lexington is the result of the combination of two managed futures firms. Lexington Asset Management principal Mark Helweg has been involved in futures trading, trading system development and CTA management since 1988.

His engineering background serves as a foundation for the quantitative research methodology he uses to design and test superior trading systems. Mark has authored books and several articles about systematic futures trading.

Head of trading at Lexington, I have been a hands-on investment portfolio manager for more than 20 years. My focus is the disciplined execution of Lexington’s proprietary trading systems along with portfolio and risk management. I also assist Mark in the system research and testing effort.

The trading programme was launched in October 2006. Assets under management currently exceed USD30m, and last year the trading programme returned 55.25 per cent net of fees.

HW:: Who are your service providers?
RW:Accounting is provided by Futures and Hedge Fund Services, our auditor is Spicer & Jefferies, and our law firm is Henderson & Lyman.

HW:: Have there been any recent launches?
RH:: Lexington Asset Management is in the process of launching a managed accounts structure that will permit investors to allocate through managed accounts as well as in the commingled fund.

HW:: How and where do you distribute the fund? What is the profile of your current and targeted client base?
RH:: Clients are predominantly drawn from North America.

Historically, distribution is focused on high net worth individuals, wealth advisors and institutional investors in the south-eastern US.
This year we have launched a series of initiatives to expand marketing efforts to reach a broader range of institutional investors.

HW:: What is the investment process of your fund?
RH:: We undertake systematic trading of managed futures in 40 of the most liquid futures and commodity markets around the world. We trade more than 800 systems in three time zones, a combination that achieves diversity of markets, trading timing and system.

HW:: What is your approach to managing risk?
RH:: Risk is managed at both the system level and the portfolio level. At the system level, stop-loss orders are entered in the markets for each open trade. A proprietary filter determines strength of trend and activates different trading systems. The stop levels are calculated by the system algorithm and are designed to exit losing trades as quickly as possible while providing the flexibility to navigate market ‘noise’. Risk management at the portfolio level consists of diversification across markets, system styles, trading time frames and sizing of portfolio positions. Before implementation, all systems have been rigorously back-tested for profitability, risk and stability factors based on historical data.

HW:: Has your performance been as per budget and expectations? Do you expect your performance or style to change going forward?
RH: Last year was one of unprecedented volatility and long-sustained trends, resulting in the trading programme returning 55.25 per cent. Unlike equity long/short strategies, performance of managed futures strategies is not related to prior performance. The strategy can perform on the way up as it did on the way down.

HW: What opportunities are you looking at right now?
RH: We are watching the impact of global stimulus spending on commodity inflation.

HW: What events do you expect to see in the year ahead?
RH: As governments inflate way out of the recession, expect to see commodity inflation on the horizon.

HW: How will these developments impact your own portfolio?
RH: We hope it will result in long-sustained pricing trends.

HW: What differentiates you from other managers in your sector?
RH: The diversity of systems - 800 - and rigid risk management. The principals’ net worth is in the fund, and we have stop-losses on every trade.

HW: Do you have any plans for other product launches in the near future?
RH: We hope to build out the managed account offering and open an offshore product in the near future.

Interview from Hedgeweek

The Lexington Keystone Trading Program uses quant systems to trade across 40 markets including currencies, interest rates, indices,
energy, meat, graints, softs and metals. It uses nine different algorithms. The program does not allow trades to be executed when the market
drops too drastically, said Hounshell. “The beauty of what we do, we’re not in the business of predicting,” he added. “We let our
systems handle the activity.”

Hounshell expects the U.S. dollar will get stronger. Even though the country’s economy is weak, others around the world are much weaker,
he said. The pending stimulus package that President Barack Obama hopes to implement will also have a “semi-euphoric” effect on the markets,
although Hounshell expects it will take 12-18 months before the effects are felt. He remains bearish on commodities for the next six months or so.

Hounshell started his career on Black Monday at Fifth Third Bank. He spent the next 17 years managing high-net-worth money and then
worked at CTA firm Chickasaw Capital from 2004 to August 2006. Lexington Asset Management has offices in Raleigh, N.C. and Naples, Fla., in addition to its Lexington, Ky. base.

Article from Alternative Investment News

Portfolio manager Rob Hounshell said the firm had been kicking around the idea of a SMA platform for a long time, but current liquidity and transparency issues
in the hedge fund space exacerbated the launch.

“Even before the Madoff situation, institutions wanted to know they can pull the plug on their investments,” said Hounshell.
“They also like to see their assets and plug them into their database to see how we’re doing versus what they’re doing.”

The firm expects its first allocation either in March or April from a fund of funds.

Hounshell said institution investors are taking a serious look at managed futures given the well-publicized performance issues of hedge funds,
and argues that CTAs as an asset class should make up the bulk of an institutional portfolio rather than long only stocks.

“If you’re able to get past the risky mantra of managed futures, the numbers are much more favorable than long equities,” he said.

Lexington returned 55% net last year to its investors. Hounshell said Lexington rode the commodities wave up in the beginning of the year and down in October.

“If you look at long/short hedge funds, many of them were fairly net long and had poor performances. We’re all about absolute return and our performance last year was a
testament to that,” he said.

This year, Lexington has gotten off to a slow start dropping a few percentage points in the first two months of trading.
Hounshell said he doesn’t expect to see the same type of volatility and returns this year but believes the fund will continue to profit nonetheless.

Article from FINalternatives.com

The offshore fund will mirror the flagship Lexington Keystone Trading Program.
The fund uses quant systems to trade across 40 markets including currencies, interest rates, indices, energy, meat, grains and metals, using nine different algorithms.

Separately, Lexington is launching a managed account for a startup fund of hedge funds in North Carolina.
The fund of funds, which Hounshell declined to name, will invest $3 million with Lexington, likely by May 1.
“More and more people want individually managed accounts [because of] the transparency issue,” Hounshell pointed out.
As a result, Lexington will seek to set up more separate accounts for clients.

Hounshell co-founded Lexington in August 2006, before which he worked at CTA firm Chickasaw Capital.

Suzy Kenly
Alternative Investment News
Institutional Investor News

LexAm is a member of the National Futures Association (NFA) and is registered with the Commodities Futures Trading Commission (CFTC) as a Commodity Trading Advisor (CTA).

Lexington Difference . . . Our Edge
Our edge is a combination of several unique components which include:

Diligent Research � We are a research firm that trades, not a trading firm that does research. We are relentlessly looking for new, better and different systems and portfolio techniques to improve profit potential for our clients.

Unique Systems � The systems we use are proprietary and have been thoroughly backtested over many years and varied market conditions to determine their profit potential and risk characteristics.

Deep and Broad Diversification � We continually employ hundreds of systems varying among algorithm type, market and time frame.

Multi-Level Risk Management � Risk management techniques include stop loss orders for every trade, intense diversification and adjustments to positions sizes according to volatility variance.

Vast Experience � The professional staff has over 60 years of combined, �hands-on� futures trading and portfolio management experience.