The performance of Blacksquare Capital’s diversified absolute return fund has improved after changes made by the multi-manager to lessen the portfolio’s dependency on market direction to generate returns.
The fund lost money during the volatile months of August and September but recovered to produce a positive return of 1.38 per cent at the end of October.
In September, the firm upped the fund’s cash weighting to 20 per cent from 5 per cent by halving its holdings in Occam Asian focus and Old Mutual UK dynamic equity.
Lowering exposure to these long/short equity funds was intended to reduce risk and preserve capital. This process continued in October, when both funds were sold along with another long/short equity holding, MW GaveKal Asian opportunities.
The proceeds were used to fund purchases of a systematic fund, AC Quant Spectrum, and two long/short equity funds, Old Mutual global equity absolute return and MLIS Theorema European equity. Cash in the Blacksquare fund was halved to 10 per cent.
Blacksquare’s multi-manager absolute return was also in positive territory at the end of October with a return of 0.42 per cent.
The majority of managers generated positive performance for the fund but Aspect Capital diversified trends, a systematic fund, lost 4.35 per cent over the month.
Blacksquare says these losses are consistent with the typical behaviour of the fund’s trend-following strategy, given the sharp reversals in a number of markets.
Another systematic fund, Fulcrum alternative beta plus, fell by 1.19 per cent in October but, on balance, Blacksquare is happy with the diversification benefits the systematic managers in the multi-manager fund have shown in recent months and the improvement in its diversified fund.
Blacksquare Capital chief executive Christopher Peel says: “We would expect to keep risk conservative between now and the year end, at least until we have some type of outcome to the crisis in Europe.”