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

Life sciences outperform

DAFNA Capital's flagship DAFNA Life Sciences fund was able to preserve capital throughout the first quarter. The fund has an annualized return of 20.7%. According to a performance update reviewed by Opalesque, the strategy improved performance in April as stocks rebounded.

The long/short strategy makes investments in biotechnology and medical device companies. The fund uses low to no leverage and maintains a high level of liquidity. Portfolio positions trade largely independently of the economy and with little correlation to each other, the strategy also maintains a low correlation to other healthcare strategies.

DAFNA is led by Dr. Nathan Fischel CEO and founder. Dr. Fischel was Professor of Pediatrics at UCLA School of Medicine, and Director of Molecular Hematology and attending physician at CedarsSinai Medical Center, from 1988 to 2009. He is currently Professor Emeritus at UCLA. Dr. Fariba Ghodsian is the Chief Investment Officer. Prior to joining the firm, Dr. Ghodsian was Managing Director of Healthcare Research at Roth Capital Partners. Before this, she was a senior biotechnology analyst at Lehman Brothers, Hancock Institutional, and Wedbush Morgan Securities, as well as Director of Business Development at Medclone and a research scientist at Allergan Pharmaceuticals. In 2015, she was profiled in the book "Women of the Street: Why Female Money Managers Generate Higher Returns".

Capturing crisis alpha

Sydney-based Whitecove Capital's flagship Whitehaven SPC Correlation Fund was up 3.9% in March and is up 4.7% year to date. The strategy, which was launched in 2011, has an 8.8% return since inception.

The fund aims to generate returns during market sell-offs or during times of high volatility. The strategy takes advantage of deviations in the relative pricing of correlated financial instruments, which normally mean-revert within a short to medium-term time horizon. Currently, the fund trades commodities, interest rates, equity indices, and foreign exchange markets.

The strategy was able to capture the intense price action in March, according to an update to investors reviewed by Opalesque. "We targeted our allocation of capital to highly correlated futures contracts as periods of cross-asset washouts made for particularly dangerous conditions. For example, traditional safe havens such as gold, Japanese yen, and bonds declined during some periods when equities and risk currencies were plummeting. Additionally, oil dropping 30% posed an immense risk for our commodity-based strategies. Technical events such as exchange circuit breakers proved challenging to our execution algorithm when spreading markets across exchanges. The CME +/- 5% circuit breakers occurred regularly in US equity markets during the Asian time zone impeding trading opportunities. A conservative discretionary approach to mitigate some of these risks was adopted throughout March," the note said.

Australian stocks outperform

Australian fund Gyrostat Capital Management was up 5.78% in March and is up 11.64% year to date. The fund is designed for retiree income with protection, and to address sequencing risk (the risk of major market falls). The distinctive features are 'hard' protection always in place and a track record of returns increasing with market volatility.

The fund is offered in Australian dollars but can be made available in USD and Yen to institutional investors. The strategy invests in ASX20 and international assets with the lowest cost using a buy and hold approach. No more than 15% of the fund may be invested in international assets. The strategy is considered a defensive addition to retiree portfolios, designed to provide equity income.

According to an investor update reviewed by Opalesque, the fund improved its guidance throughout the quarter. "With the evolution of our investment processes and raising the 'hard' quarterly risk tolerance from 2% to 3% (in February 2019) we upgrade our returns guidance in stable markets to the 90 day bank bill swap rate ("BBSW 90"+ 3%). Our Investment Strategy allows up to 10% of the fund's assets to be invested in international assets. We anticipate returns in all market environments of at least BBSW 90 + 3% (enabling investors to receive income and capital growth.) We anticipate increasing levels of 'late cycle' market volatility with geopolitical, historically high debt levels, and valuations elevated," the note said. ***

Prior issues of The Corona Fighters Report:
Report 1; Report 2; Report 3; Report 4; Report 5; Report 6; Report 7; Report 8; Report 9; Report 10; Report 11; Report 12; Report 13;Report 14; Report 15; Report 16; Report 17; Report 18; and Report 19.

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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.

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