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Alternative Market Briefing

A.W. Jones emerging manager fund of funds passes three year milestone, up +12.61% through August

Wednesday, October 07, 2020

Bailey McCann, Opalesque New York for New Managers:

An emerging manager fund of funds from A.W. Jones has just passed its three-year milestone and is outperforming so far this year. The fund was up 3.29% in August and is up 12.61% year to date through August.

A. W. Jones is the firm credited with starting the first-ever hedge fund in 1949. The emerging managers fund of funds is an outgrowth of the firm's flagship fundamental long/short strategies. A.W. Jones has been an early investor in next-generation hedge fund managers since the mid-1980s. The fund of funds is led by Robert Burch, grandson of Alfred Winslow Jones. Burch is a portfolio manager and CIO.

"Our goal with the fund is to provide access to managers that we believe are specialists and/or those who provide unique alpha generation," Burch tells Opalesque New Managers. Managers in the fund are a subset of managers that are in AW Jones flagship fund of funds but are emerging. The flagship strategy is a blend of emerging and established managers.

According to Burch, the group is slightly overweight to TMT strategies and biotech strategies - areas of the market that currently exhibit high growth potential. "We think there is a huge amount of discontinuous change in areas like biotech," Burch says. "And we think it's hard for quant funds to get a handle on that because so much of it is event driven. It's hard for an algorithm to guess how a phase three trial is going to go based on the price action of a stock. That's an opportunity for managers that focus on fundamental analysis and have the background to understand biotech."

Identifying specialist managers and unique strategies has helped to overcome some of the resistance to fund of funds. The structure has a reputation for being high-fee and low-alpha, but Burch notes that because the firm's initial investment is larger the fund is able to offset fees and gain access to high-performing managers. By focusing on nichier strategies, the group also provides a less correlated source of return. The fund invests in 10-15 managers and has yet to have a down year. The fund has +18.3% net annualized compound return since inception in March 2017.

Burch suggests that more volatile markets could be beneficial for emerging managers going forward. Emerging managers tend to trade more dynamically than large funds and could pick up opportunities that other funds have to leave behind.

WEBINARS:

In the Opalesque SKILLSLAB Diversification Matters webinar series we present investment managers who not only were up / protected in Q1-2020, but also YTD and in previous years. To participate in the webinar, please click here:

- Registration (free): www.opalesque.com/webinar/
- Time: Tuesday, Oct. 27th 2020, at 10 am EST

You can replay Episode 1, as well as other group and sole manager presentations, here: www.opalesque.com/webinar/#pastwebinar

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