The Melchoir Selected Trust European fund will launch on February 1 as a Luxembourg Sicav. It will be managed by Leonard Charlton who has run the European hedge fund on which it is modelled for the last three years. Charlton will adopt a similar investment strategy on the new fund.
Dalton says this is the first time Charlton’s long/short investing skills have been available to retail investors. The fund’s aim is “to generate steady returns independent of the economic environment”, Charlton says. “We do not rely on strong equity markets to deliver returns,” he adds.
The fund will typically have between 30 and 60 stocks and will have a net market exposure range of plus or minus 20 per cent. Gross exposure will normally be between 80 per cent and 150 per cent, the group says. The fund will not be highly leveraged; Charlton says he will never invest more than 150 per cent of net asset value. About 70 per cent of the fund will be in large-caps, to maintain liquidity.
The manager describes his investment style as contrarian. He avoids “consensus opinion and crowded trades” with the aim of generating a different return profile than other hedge funds, he says.
He also emphasises the money that can be made on the short side. “Most hedge funds are better at making money on the long side and are less good on the short side. We have generated alpha of 1 per cent per month on short positions,” Charlton says. He does this by employing a policy of actively looking for short as well as long holdings. Most investors do not focus on stocks that will go down, Charlton says, but he seeks out stocks he is happy to bet against. “Our focus on finding stocks that will go down delivers returns—not just in 2008, when everyone made money on their short positions, but also in 2007 and 2009,” he adds.
Charlton was formerly a portfolio manager at GLG, co-managing the GLG Europe Opportunities fund. He joined DSP in 2006.
Minimum investment for retail investors is £6,000. There is a management fee of 2 per cent and a performance fee of 20 per cent of returns above one month Euribor.