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Alternative Market Briefing

Concentrated long/short equity hedge fund up over 20% YTD

Wednesday, August 25, 2021

amb
Theron de Ris
B. G., Opalesque Geneva:

The Eschler Recovery Fund (the Partnership) is a long-biased long/short equity strategy deploying long-term capital into a small number of well-researched small and mid-cap ideas in out-of-favour segments of the market. The strategy is currently invested in multiple deep value industries that exhibit strong risk-reward characteristics. It combines market cycle and industry analysis with bottom-up stock picking.

It currently allocates a third of the portfolio in precious metals, and a third in energy. The rest is invested in financials, resources, and other industries. The geographical allocation is mostly the US, followed by Canada and the UK. This unconventional portfolio has resulted in a low correlation to peers and the overall market.

It has come a long way from its original $2.2m in AuM split between the founder's own savings and two external backers; the fund now manages $17m.

The fund is run by London-based Eschler Asset Management, an FCA and SEC-registered manager launched in 2012; the firm has $563m in group AUM.

The partnership has limited capacity and principals of Eschler A.M. are heavily invested alongside limited partners.

Theron de Ris is the founder of Eschler A.M. He gained experience as a senior analyst at Indus Capital Partners - during which time he independently started his long/short equity fund. Prior to Indus, he spent 13 years in the equities division at Goldman Sachs and Morgan Stanley. He will be presenting at the next Small Managers Big Alpha webinar on 7th September.

Track record

Eschler Partnership's track record has been top-ranked in the long/short equity category since inception.

According to documentation seen by Opalesque, since its inception in October 2012, Eschler Partnership's USD B Share Class (no management fee and 25% performance fee over a 6% hurdle rate) has annualised +12.5% net. It is up over 20% YTD after returning 2.3% in July 2021.

The USD A Share Class (1% management fee and 15% performance over a 3% hurdle rate) has annualised +16.6% net since inception in January 2017. It is up almost 22% YTD after returning 2.4% in July.

The HFRI Equity Hedge (Total) Index was down 1.2% in July and is up 10.5% YTD - outperforming the HFRI Fund Weighted Composite Index (9.2% YTD). Event-driven strategies seem to be the only ones to top long/short equity strategies so far this year.

The managers inform us that Eschler is now an offshore Cayman SPC (segregated portfolio company). They have elected US partnership tax status to accommodate US taxable investors, while keeping the ability to have non-US citizens invest in the same vehicle, as long as they don't mind their funds being commingled with US investors. In addition, they have opened a US-tax exempt feeder, allowing endowments, pensions, and other tax-exempt entities in the US to invest with Eschler.


Related articles:

16.Jan.2020 Opalesque Exclusive: Update: Eschler long/short equity hedge fund returns 19.5% in 2019

27.Aug.2019 Opalesque Exclusive: Eschler's long/short hedge fund gains from gold, uranium and energy-related industrials

***

Next Small Manager Big Alpha webinar

With larger quantities of capital chasing the same alpha strategies and continuing to erode alpha, savvy investors are turning to smaller or emerging managers as they look for alternative sources of return. In the third episode of this ground-breaking webinar series, we present four managers:

- Salman Baig, Unigestion
- Aylon Morley, SAVA Investment Management
- Theron de Ris, Eschler Asset Management
- Daniel Butler, Blue Swan Investors

When: Tuesday, September 7th, 2021, at 10:30 am ET
Free registration here: www.opalesque.com/webinar/

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