Strategies including macro and commodity trading advisers – also known as managed futures – have made positive contributions to performance while investment opportunities have opened up in event-driven strategies. Altin’s macro exposure grew to 20.59 per cent in the first quarter while exposure to event-driven strategies rose to 12.14 per cent.
3A says opportunities have arisen in event-driven strategies as some firms have a lot of cash on their balance sheets which they can use to buy back stock or make acquisitions. Such companies have surprised on the upside. There are also merger arbitrage opportunities due to the price differences between those firms that are buying and those being sold. Some assets are also looking cheap and sentiment has improved.
CTA/managed futures is a highly liquid strategy with very short or no lock-in periods, which 3A expects to outperform this year. It involves trading in commodity, futures and foreign currency markets.
3A chief executive Jean Keller says CTA/managed futures saved the hedge fund world in 2008 but followed this up in 2009 with one of its worst years of performance. He says a lot of investors have now given up on this strategy, creating a good entry point from which Altin should benefit as markets become more volatile.
Keller says: “The main risk for hedge funds is liquidity risk. We do not like liquidity mismatches where managers offer redemption terms to investors that are unrealistic in relation to their assets. Even in 2008, we were not locked in because we tend to prefer liquid strategies.”