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Alternative Market Briefing

Corona Fighters - Report 1: Asset managers who delivered during the meltdown

Monday, April 06, 2020

B. G., Opalesque Geneva:

In the midst of the current market turmoil, this is the first of our regular reports on hedge fund managers who are bucking the trend.

Niche-oriented strategy that avoids crowded rooms

As reported last month, this manager has done well by avoiding popular hedge fund strategies. New York-based Eagle's View Capital Management's Dedicated Fund has returned +3.34% net (est.) in March 2020 and +4.33% YTD. Their Offshore Fund Class G returned +3.12% net (est.), +3% YTD. And Eagle's View Capital Partners returned +2.2% net (est.), +1.8% YTD.

"We achieved this (return) by making investments that do not correlate to the direction of stocks, bonds, commodities or other asset classes," said president Neal Berger in a communication to investors seen by Opalesque. "Furthermore, the 'hidden' risk-management attributes of our portfolio construction had its first opportunity to be showcased during March." The portfolio was specifically built to avoid strategies that are popular with mainstream allocators, he continues, so it is not sitting in a crowded room during a time of panic. The manager expects the "continued volatility of markets to be a positive for Eagle's View and we feel very comfortable and well positioned for the environment now and ahead of us."

Neal Berger will be a presenter in the upcoming webinar: The Corona Fighters, April 20th, 2020.

You can watch this recent interview on Opalesque TV here: Neal Berger: Living On the "Edge"

Long/short equity with bear market experience

London-based ARR Investment Partners' opportunistic long/short equity hedge fund was up 18.7% (net) in March, 22.7% YTD. It has cumulated 98% since its 2013 launch. In its first two years, the fund was predominantly invested in Eastern European equities. Now it invests globally.

A report sent to investors and seen by Opalesque describes the strategy as such: "The investment process is predominantly top down. Our macro-analysis, market and sector screening determine our general exposure levels, country and sector allocation. We screen for mainly four investment patterns: Stock Rebounds, Dynamic Profit Growth, Bubbles, Structural Losers." The portfolio risk is actively managed with short positions, stop-losses and put options.

The success of the strategy is based on a behavioural edge. With a flexible portfolio exposure, it can wait for the most attractive investment opportunities. Furthermore, "ARR's differentiation arises from the portfolio manager's five years of bear market experience in Russia from 2011 until the beginning of 2016. This allowed ARR to find specific investment criteria, especially for short investment patterns, and preserve capital in market corrections."

Global macro for all seasons

The Bodhi Tree Tactical Allocation Fund gained an estimated +0.7% net in March 2020. For the quarter, the Fund gained +3.2%, compared to -19.6% for the S&P 500 Total Return and -13% for the HFRX Equity Hedge index. The Fund is a systematic global macro fund that seeks to produce all seasons returns by dynamically adjusting exposure to multiple asset classes throughout a market cycle.

The Fund also generated positive returns in December 2018 and Q4-2018 in its former systematic quantitative strategy.

CIO Shalin Madan noted in a communication to investors seen by Opalesque: "In a nutshell, we saw the potential for a crash that would trip up Quant/Risk Parity models, followed by a recession that culminated in a catastrophic bear market worse than the Global Financial Crisis. The entire road map was outlined multiple times beforehand.

"Our edge is the macro framework that we operate within, which combines macro market cycle analysis to adjust market exposure with a strong risk management philosophy."

"It stands to reason that if securities alpha or manager selection alpha is no longer prevalent as it was 15, 20 years ago, the only way to generate alpha is by asset allocation; effectively being in the right asset classes or owning the right factors at the right time," he said in an Opalesque TV interview (Bodhi Tree Asset Management: Built by humans. Driven by A.I. ). You can read last year's article on Bodhi Tree here: The Big Picture: Alpha generation requires an additional level of tactics today.

Madan told Business Insider on March 27th that he thought this was the end of the leverage cycle. "We've seen 35, 40 years of leveraging in the US economy where the growth of asset prices has been significantly higher than the actual growth of profits or income - and we think that's over."

And others…

The Swiss manager QCAM Currency Asset Management reported positive returns in all its programs, the most outstanding ones being the SI 30Vol (Systematic Intelligence, Multi Program, 30% Volatility), which was up 55% in March and 74% YTD, and the SI 20Vol, which was up 33% in March and 44% YTD. The Systematic Intelligence Program (SI) is a fully systematic and globally diversified investment strategy, designed to achieve returns irrespective of the direction of the broader market. The strategy deploys assets globally by investing in 80 different equity, currency, commodity, interest rate and volatility markets via highly liquid instruments to maximize diversification and limit volatility. CEO Thomas Suter participated in the Opalesque Currency Trading Roundtable in 2018.

The Bayforest Innovation MAC fund returned 15.5% in March, 16.6% YTD, after delivering yearly positive returns since its March 2018 inception. Bayforest Technologies Ltd is a London-based alternative asset management company focused on relative value systematic trading, specialising in short term mean reversion trading, a less common area which results in its returns having a unique distribution. "We have the capability of processing hundreds of million orders per second and produce estimates on every single order based on our proprietary real-time inference framework," according to a report to investors seen by Opalesque. " We write all software in house as most vendors software are unable to handle our streaming data load requirements without material latency bottlenecks."

On the Montlake UCITS platform, the Cooper Creek Partners North America Long Short Equity UCITS Fund, incepted in November 2018, generated a +4% return while averaging -1.9% net exposure, compared to the Russell 2000 and the S&P 500, which returned -21.9% and -12.4%, respectively. Over this period, the longs returned -19.7% and the shorts returned 23.7%. The fund is up 4.5% (net) YTD. Managed by New York-based CooperCreek Partners, it seeks to generate attractive absolute returns, non-correlated to equity market performance by investing in a portfolio of high conviction ideas with low net exposure. "The short book led performance again in March, with four retail, two business development corporation, two consumer goods, two industrial, one business services and one restaurant company each contributing over 80 basis points to performance," said in a report seen by Opalesque.

Also on Montlake is the DUNN WMA Institutional UCITS Fund, which returned +3.75% in March, 0.10% YTD. Incepted in September 2011, it is a 100% systematic medium to long-term trend following program, encompassing a portfolio of financial, energy, metal and agricultural futures markets. The investment objective is to extract profits from up and down-trends, resulting in a return stream that exhibits a very low correlation with traditional asset classes. It is managed by Dunn Capital Management, based in Florida.

There is also the Crabel Gemini UCITS Fund which returned 2.5% in March, 3.5% YTD. Launched in October 2017, it is a systematic portfolio of predominantly short holding period strategies designed to target behavioural and structural market inefficiencies across a broadly diversified set of global futures and foreign exchange instruments. It is managed by Crabel Capital Management, based in Los Angeles.

Cyril Delamare, CEO of Montlake, spoke to Opalesque last year about the volatility strategies that can be found in UCITS: article here.

Related article (April 3rd, 2020): Ironshield Credit Fund launches on the MontLake UCITS Platform ICAV


Disclaimer: This is not investment advice. Opalesque has not verified this information and gives no warranty of accuracy or completeness. Past performance is not indicative of future results. See our Terms & Conditions for more information.



- The Corona Fighters: Meet the asset managers that actually delivered during the melt down

Episode 1: Monday, April 20th, 10 am EST

Opalesque will present a range of investment managers who will give a succinct presentation on how and why their strategies delivered positive returns and/or protected during the Corona led market meltdown, with Q&A session.

For investors only - register now as seats are limited: www.opalesque.com/webinar/

Have a look at our other upcoming webinars:

- COVID-19 Survival Training for Family Businesses - www.opalesque.com/webinar/covid_survival/

- Climate Change and Carbon as a Liquid Asset Class with Michael Azlen: April 7th 10am EST
Register: https://www.opalesque.com/webinar/

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