A case for multi-strategy funds being the vehicle of choice when navigating through late stages of business cycles
- Highbridge Multi-Strategy Fund (HMSF; the Company) is a closed-ended investment company admitted to trading on the London Stock Exchange which launched in May 2006. Its investment objective is to generate consistent returns with low volatility.
- Prior March 2016, the Company was known as BlueCrest AllBlue and it invested in a fund of internal hedge funds managed by BlueCrest Capital Management (BCCM). Following notice of the return of external capital by BCCM from the start of 2016, Highbridge Capital Management (HCM) was appointed as the Company’s investment manager following an extensive manager selection exercise.
- Substantially all of HMSF’s assets are invested in the Highbridge Multi-Strategy Fund (the Master Fund), an open-ended global multi-strategy hedge fund managed by HCM, launched in 1992 and diversified across a wide range of relative value strategies. The Master Fund targets an annualised return of 7-12%, an annualised volatility of 3-6% and a beta to the S&P 500 index of less than 25%.
- We believe that there is a substantial case to be made about multi-strategy hedge funds being the vehicle of choice when navigating through the late stages of a business cycle, which we currently find ourselves in, in our view. We believe that HMSF presents a compelling way to tap into a truly diversified strategy with very low correlations to traditional asset classes whilst capturing steady returns, generated from a diverse range of idiosyncratic sources.
- Both HMSF and the Master Fund have generated good absolute and relative risk-adjusted returns over a number of years, with low/negative beta/correlation to equity markets. The Master Fund has delivered an annualised NAV return of 6.1% for the six-and-a-half years since the current CIO at HCM, Mark Vanacore, took over at the start of 2012, with an annualised volatility of 3.3% and a beta/correlation to the S&P 500 index of 11.8%/35.1%.
- The shares were trading at a discount of circa 10% to net asset value 27 months ago. For the last eight months however, the shares have been trading at around par, with an average of 0.3% premium year-to-date, the best rating amongst the established single manager listed companies. In turn, this has facilitated the sale of shares from the treasury, which has amounted to circa £15.4m to July 2018.
- HMSF provides access to an established hedge fund manager, Highbridge Capital Management, which has the experience, developed over the last 25 years, which enables it to exploit the rich opportunity set for relative value strategies, the area in which they specialise.
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