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Alternative Market Briefing

Corona Fighters Report 7: Asset managers who delivered through the meltdown

Tuesday, April 14, 2020

Bailey McCann, Opalesque New York:

Amid the current market turmoil, this is our regular report on hedge fund managers who are bucking the trend.

Prior issues: Report 1; Report 2; Report 3; Report 4; Report 5, and Report 6.

Specialist energy traders make the most of volatility

Energy specialist firm HITE Hedge Asset Management outperformed in March despite some of the worst drawdowns some oil traders have ever seen. HITE Energy was up +6.10% in March and is up 0.26% YTD. HITE Carbon Offset was up 22.32% in March and is up 32.93% YTD. Finally, HITE Hedge was up approximately 1.5% in March, according to investor materials reviewed by Opalesque.

HITE offers a suite of niche energy funds. The HITE Energy fund, which launched in February of 2018, is a systematic relative value strategy that limits commodity exposure and focuses on finding opportunities throughout the energy value chain. HITE Carbon Offset, which also launched in 2018, is a market-neutral carbon strategy. The fund shorts legacy parts of the carbon value chain and puts a greater emphasis on energy transition opportunities. HITE Hedge, the firm's flagship fund, launched in 2004 and has a concentrated portfolio with a midstream focus.

The fund sees opportunity in the energy sector right now despite oil prices falling through the floor. HITE notes that billions of relative value capital have left the space. With the combination of volatile price action and a liquidity squeeze in high yield, there are opportunities for energy specialists to find value. The volatility in oil markets is also helping to highlight the need for more sustainable energy which is driving returns in the carbon offset strategy.

Despite volatility a CTA catches the trend

Swedish CTA RPM Risk & Portfolio Management AB was able to catch the trend in March and end the month positively. The firm's RPM Evolving CTA Fund was up 1% in March and is up 3.3% YTD.

RPM Evolving is a multi-CTA fund that focuses on crisis alpha and trend following CTAs. Short-term Trading, Volatility (VIX), and Fundamental CTAs are diversifying and balancing components. Profits in bonds and energies offset losses in equities as performance was mixed across managers and substrategies within the fund in March.

A performance outlook sent to investors summed up RPM's view of what lies ahead this way: "In the blink of an eye, the macroeconomic outlook has changed from "cyclical slowdown" to "major recession". After Covid-19 forced a large-scale global shutdown, it is now widely expected that output will contract substantially in 2020H1. However, it is also expected that the global economy will rebound significantly in the second half of the year. When and to what extent will depend on how long the virus crisis will last and how well governments will be able to cushion its economic effects. That being said, after last week's rebound, RPM portfolios are now well-balanced, i.e. long both equities and bonds, indicators are largely neutral, while portfolio risks remain well-controlled slightly below long-term average levels."

LatAm comes into view

LatAm Consumer Credit's flagship strategy is up 0.76% year to date and is up +67.53% inception to date from 2017. The strategy is focused on consumer credit opportunities throughout the region.

In a performance update to investors reviewed by Opalesque, the firm says that it sees significant opportunity focusing only on the over-compensation for credit risk in Argentina and a few other countries in the LatAm. Countries like Argentina, with a history of defaults, capital controls and forced conversion of savings into domestic currency, don't create the necessary appeal for domestic savers. This creates a structural opportunity for the firm. The strategy involves purchasing portfolios of loans and senior tranches of consumer finance ABS from originators in the marketplace. The loans typically have less than 5 months weighted average life and are performing.

And others...

The Athena UI Fund, from Conservative Concept Portfolio Management AG in Germany, was up +5.47% in March and is up +5.08% YTD. The strategy is an options trading fund that looks for systematic differences in the implied volatilities throughout the option chain. The fund is offered as a daily liquid product.

Highmore's Trade Finance Fund was up +0.64% net in March and is up 1.94% for 1Q; April estimate is up approximately +0.70%. The strategy offers short duration financing growth for under-banked small and medium sized enterprises. The fund generates income for investors through this approach while also maintaining a low correlation to the broader market.

***

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. ***

WEBINARS:

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

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

Opalesque will present several 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/corona/

- COVID-19 Survival Training for Family Businesses April 15th, 10 am EST

Register: www.opalesque.com/webinar/covid_survival/

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