Thames River Capital attributes the strong performance of its Warrior funds of hedge funds to their focus on up and coming hedge funds.
Warrior 1 and 2 were the star performers in Standard & Poor’s first-quarter update of the fund of hedge funds sector, having returned 6.8 and 8.7 per cent respectively.
All funds of hedge funds rated by S&P delivered positive returns over the quarter but the best performers had a bias towards equity-related strategies such as special situations, merger arbitrage and long/ short equity hedge. These strategies benefited from mergers and acquisitions activity.
The majority of returns produced by the Warrior funds derived from special situations managers but a position in Paulson advantage plus, an event-driven fund, was a significant factor.
The Paulson fund uses a short credit strategy, enabling Thames River managers Ken Kinsey-Quick and Alex Kuiper to benefit from concerns about sub-prime lending and credit defaults in the US.
The managers are now looking to reduce equity exposure in the Warrior funds to reinvest in global macro strategies as they do not want to be too exposed to the direction of markets.
Investment director Michael Warren says: “If you look at the numbers behind the Warrior funds, they just get better and better. Performance is consistently strong and we have had very strong flows into the funds.
“Warrior is a more aggressive portfolio investing in small, nimble funds. The reasons for investing in hedge funds at an early stage of development are well documented. Performance tends to be better.”