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Blacksquare nears volatility target

Blacksquare Capital is looking to increase risk in its multi-manager absolute return fund to bring annualised volatility closer to its 4 per cent target.

The fund returned 1.05 per cent last month and year-to-date returns were up to 2.63 per cent. These returns were delivered with annualised volatility closer to 3 per cent, which Blacksquare regards as a great achievement, given the challenging environment faced by its underlying managers.

Capital preservation is at the heart of Blacksquare’s investment strategy and the firm says it has defended capital over the last couple of years while other managers have not. But with the early-stage recovery in risk assets such as corporate bonds, high-yield bonds and equities, Blacksquare feels there is scope to increase annualised volatility closer to its target and is preparing to put this into effect by making some changes to the portfolio.

The firm says it is pleased that nine of the 11 underlying managers in its portfolio generated positive returns in February.

Due to its focus on building its fund through managers that achieve returns in different ways so that the overall portfolio is uncorrelated, Blacksquare says it does not want every single manager to produce positive returns in any given month.

Two funds lost money in February follow different strategies. Melchior European absolute return, which was down 1.69 per cent, is a long-short equity fund. The AC Risk Parity fund, a systematic fund, fell slightly by 0.2 per cent.


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