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B. G., Opalesque Geneva: For investors who are looking to call on funds of hedge funds' power to provide downside protection, here is one that specialises in global liquid arbitrage strategies and that does just that.
FoHF manager AlphaBee Asset Management, through its two sub-funds, invests in a variety of global liquid arbitrage strategies, selecting the most promising from an evolving universe of over 10,000 specialised alternative funds, including 500 new launches per year, through a rigorous process of qualitative and quantitative analysis, both bottom-up and top-down.
AlphaBee is a strong believer in liquid strategies as liquidity adds an element of safety in times of stress on financial markets. Furthermore, mark-to-market liquidity has a high information value. As for arbitrage strategies, which attempt to profit from pricing differentials between two or more markets and/or assets, they tend to provide decent returns. The Eurekahedge Arbitrage Hedge Fund Index was up 1.40% YTD at the end of April, annualising 6.78% since October 1999.
For example, the manager invests in a geographical arbitrage strategy on currency markets, which exploits inefficiencies across global stock exchanges. There is also a systematic commodity arbitrage and relative value strategy, which uses systematic and multi-factor models to trade in various commodity markets, and where all decisions are based on quant market analysis. The fund also invests in an arbitrager whose strategy is based on both bottom-up and top-down fundamental research to profit from inefficiencies in the US energy markets. And in statistical arbitrage strategies which invest in mispriced company stocks.
Like many of its peers, the firm negotiates financial advantages with underlying managers such as access to "founders' share classes" with reduced fees and future investment capacity potential.
Frederic Guibaud, CFA, CAIA, and a qualitative analyst with more than 25 years of financial markets experience, co-founded AlphaBee Invest SA, a private investment office in Geneva, in 2016. AlphaBee Asset Management was launched the following year in Luxembourg, seeded by a Geneva-based family office. It has been an AIFM since it gave this role to specialised ManCo MC Square SA at the beginning of the year.
Guibaud will present the funds at the upcoming webinar, Small Managers - BIG ALPHA Episode 11, on Tuesday 13 June (details below).
The funds
AlphaBee Commodity Arbitrage (ACA) is a multi-awarded, Luxembourg-regulated investment fund (Sicav-SIF). Its investment philosophy is to grow, diversify, and provide access to global liquid commodity markets on energy, metals, and agricultural products. ACA strives to maintain beta-neutrality with equity and bond markets through investments in both discretionary specialised traders and systematic strategies. The net return of ACA's class A USD, which started trading in May 2021, is +4% net YTD after a flat April 2023 (March and April's returns are estimated). By comparison, the HFRI Macro Commodity index was down 1.3% YTD at the end of April. The S&P GCSI, an investible commodity index, is down 11.9% YTD as of June 1, 2023.
According to documentation seen by Opalesque, on the ACA portfolio level, strategies in energy contributed strongly in April due to various idiosyncratic alpha drivers (arbitrage, directional, relative value, volatility) coming from a variety of strategies which are different from one another, and complementary to each other, active on several global markets, on several segments of futures' curves. Agricultural strategies were close to flat overall, whereas strategies in metals were negative.
AlphaBee Multi Arbitrage (AMA), also a Sicav-SIF, invests mainly in managed futures, equity long/short, commodity arbitrage, volatility arbitrage and other arbitrage strategies that are uncorrelated with financial markets and with each other. It has annualised a 6% net return since its July 2017 inception and is up 1.67% YTD after a flat April, compared to the HFRI Fund of Funds Composite Index which is up 1.14% YTD.
Managed futures profited most strongly last month, driven by ongoing volatility in interest rates and persistent mispricing on derivatives markets. Equity long/short strategies also had a good month, driven by idiosyncratic alpha sources. Volatility arbitrage strategies suffered somewhat but not too badly considering the collapse of equity volatility during the month. All other arbitrage strategies had overall no significant performance impact.
According to a recent update by fund administrator Citco, the funds of hedge funds which they service delivered a weighted average return of -3.3% for 2022. Seen in the context of the performance of both the broader markets and the alternatives space, this indicates FoHFs offered a good deal of downside protection versus the double-digit declines seen in many major asset classes last year.
Upcoming webinar:
Small Managers - BIG ALPHA Episode 11
Episode 11 of this ground-breaking live and interactive webinar series presents you with another carefully screened panel of investment managers worth taking a look at.
When: Tuesday, June 13 at 11 am ET (4 pm GMT, 5 pm CET)
Free registration here: www.opalesque.com/webinar/
Related article:
25.May.2022 Opalesque Exclusive: A carbon fund that walks the walk
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