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New Swiss hedge fund Stouff Capital triples assets under management

Tuesday, December 15, 2020
Opalesque Industry Update, for New Managers - After launching its first fund in October 2018, Stouff Capital is strengthening its presence with private investors and opening its doors to institutional investors. Its quantamental management strategy for global and liquid equities, with optional "convex" protection, is outperforming its benchmarks, and the company has tripled its assets under management over the past twelve months.

Following a period of market turbulence, Stouff Capital reached its performance goal during its two first years of operations. The Geneva-based asset manager generated a net performance of 13.5% with volatility of one-third of the market level. Outperforming hedge fund equity indexes and quantitative funds, which were for the most part in negative territory, its fund was able to take advantage of two of four significant falls in the market thanks to an asymmetric return profile which limited losses during market downturns while benefiting from upswing.

With the arrival in April 2020 of new beginner investors, the famous "Robinhood traders", who completely remodelled the micro-structure of the equities market, the strategy was particularly effective and provided a net return of 6% over 2020.

This performance was largely driven by the alpha generated from the selection of long and short securities. Starting with the weekly quantitative selection of the best and worst companies produced by its algorithms from an investment universe comprising the world's largest capitalisations, the fundamental analyst retained 100 long and 50 short positions on the basis of its own convictions, current themes and specific events. The long portfolios that used this approach outperformed their respective benchmarks by 5% year-on-year and the short portfolios underperformed by 9%, with the portfolios as a whole producing an annual gross contribution of 9.5%.

Christopher Tremege, Sales Manager for the Stouff Capital funds at REYL & Cie, comments: "REYL is extremely pleased with its continued partnership with Stouff Capital, which has enabled us to offer our investors a liquid strategy that combines advanced quantitative techniques and short-term tactical adjustments. We are very happy to act as a distributor for Stouff Capital, a local manager that offers a high degree of transparency and a proven investment process."

The approach optimises the risk/return profile and eliminates the fundamental manager's emotional bias while improving the reductive aspect of algorithms, which are able to analyse the past but not operate in the present or project into the future. For example, with Pfizer's announcement on 9 November of the spectacular progress it had made with its vaccine, there was a violent shift in the market away from growth stocks, which benefited from the lockdown, towards "value" stocks. Stouff Capital had been prepared for this scenario for several months and the discretionary adjustments guided by its algorithms enabled it to realign its entire portfolio in under two hours. It obtained a positive yield of 1.26% by the end of the day while most hedge funds ended down.

This rapid execution was possible by the consistent use of a machine learning tool which immediately identified the abnormal movements. The technology supports economic thinking and allows for real-time responsiveness. It also allows opportunities to be identified, for example, promising IPOs that will grow to be the major securities of tomorrow.

9 November marked a turning point, providing a foundation upon which Stouff Capital can extrapolate longer-term trends. In a bull market, its portfolios overweight value stocks which should post increased profits, and short sell securities that benefited from the lockdown and that will likely experience falling profits in the post-COVID-19 world. In practical terms, its algorithms are making new purchases in the financial sector, reducing the share of technology in the portfolios.

Julien Stouff, CEO de Stouff Capital, adds: "We are delighted to have passed $20 million dollars in assets under management in two years. We have set ourselves the goal of reaching $100 million by the end of 2021 with the support of REYL & Cie, and we will soon be launching a new management model that will allow us to continue to grow."

Press release.

Related article
29.Jan.2020 Opalesque Exclusive: New Geneva equity hedge fund prepares for coming bear markets - here:

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