Reprinted from
www.risk.net
THE VOICE OF THE GLOBAL ALTERNATIVE INVESTMENT INDUSTRY
REVIEW
Issue 163
September 2014
BEST DIRECTIONAL HEDGE FUND OVER 10 YEARS
LYXOR ASSET MANAGEMENT
Lyxor Asset Management’s managed account platform is leveraging its
ability to deliver transparency on a wide range of hedge fund strategies.
Put on the MAP
Lyxor Asset Management’s managed
account platform (MAP) has a 16-year
track record of delivering a comprehensive
range of hedge fund strategies to institutional investors, so it was no surprise to
find that the winner of the best directional
hedge fund over 10 years in the Hedge
Funds Review Americas Awards 2014 is
one of those hosted on the MAP.
In fact, Lyxor Bay Resource Partners
has been on the platform since November
2000 and is one of its longest-standing
funds. Founded in Atlanta in 1993 and
advised by GMT Capital, the long/short
equity fund employs 19 investment
professionals led by founder Tom Claugus
and is primarily invested in the US, but
also has exposure in Europe and Asia.
Its investment process is a value-based
approach that starts with setting up overall
long/short targets. In order to do so in a
consistent and replicable manner, the
manager runs regressions using historical
price data on a number of equity indexes.
Both gross and net exposures derive from
the result of these regressions and can
oscillate between 20% long/70% short,
120% long/60% short and 130% long/20%
short at high, average and low levels
of valuation. Stock-picking takes place
within the exposure framework. A gradual
process is implemented for each idea.
Typically the manager will not trade more
than 2% of the fund in any given week.
Philippe de Beaupuy, head of the MAP
UK, says: “Such an approach is unique on
the platform as well as within the universe
of directional long/short equity managers.”
Annualised performance since inception is
greater than 15%, with a return in calendar
2013 of more than 21%. In 2014 to July 15,
the fund is up 7.5%.
Speaking of the performance, de
Beaupuy says that it has been all the more
remarkable that dispersion of performance is back since the beginning of the
year, especially among long/short equity
managers. In 2013, for example, all long/
short equity managers excluding a shortseller were up, with performances varying
from 27% to 5%, but so far in 2014 only
Alex Towle
Michael
Bernstein,
Lyxor Asset
Management
40% of equity managers are in positive
territory; performance ranges from 7.5%
to -6%. “In an environment where dispersion of performance prevails between
managers following similar sub-strategies,
understanding how each manager is positioned is key in any allocation process.
Providing regular and detailed metrics of
risk to investors through our web portal is
one of the main benefits of how we exploit
transparency. Our investors view it as an
essential tool to make better informed
investment decisions,” adds de Beaupuy.
Fund turnover has been low this year
on the MAP, with only two funds closed
on the commingled platform in response
to investor redemptions; one event
driven, the other convertible arbitrage.
The pace of new launches this year has
reduced, although de Beaupuy says many
are on the verge of being launched. They
will be offered under an onshore format
compliant with the alternative investment fund managers directive as well as
under Ucits. In 2014 Lyxor has expanded
its Ucits franchise. Assets in Ucits have
now passed the $1 billion mark. Two USbased managers – Canyon Partners and
Tiedemann Investment Group – currently
have versions of their strategies that fit
the bill. The success of its Ucits offering
as well as its capacity to source talented
managers encourages Lyxor to strategically contemplate the ‘40 Act space.
Lyxor leverages strong relationships in
the US, using a contact network of old and
current managers and service providers
such as prime brokers. Of the MAP’s
nine-strong analyst team, seven are USbased, as are 58% of MAP funds. Lyxor
is also looking to broaden the offering
of the platform at the moment and is
working with two US managers to offer
strategies with an illiquidity premium. At
the moment all MAP funds offer either
weekly or monthly liquidity.
Even if only one manager was
launched last summer in the early stage
space – Paris-based Melanion Capital,
which operates a dividend futures
strategy – its success in attracting investor
interest validates the approach. De
Beaupuy says investors tell him they
would not otherwise have been able
to allocate to an emerging manager, if
it were not that the managed account
format alleviated the risk of doing so.
Additionally, last year Lyxor launched a
super-institutional share class that allows
investors to access a hedge fund through
a managed account format for the same
total expense ratio as the benchmark fund.
While on the commingled platform the
minimum investment is $100,000, the
minimum ‘S’ class investment is $5 million. Another condition is monthly rather
than weekly liquidity. De Beaupuy says 30
funds on the platform now offer the share
class, which represents 10% of all assets,
and all new launches will have it as part of
their offer.
“The world is full of opportunities
for us to help investors better allocate
to talented managers,” concludes
de Beaupuy. ■
Bay Resource Partners won best directional
hedge fund over 10 years in the Hedge Funds
Review Americas Awards 2014.