Not All Hedge Funds Are Crying

08/20/2008 12:00 am EST


Andrew McHattie

Editor, Investment Trust Newsletter

Andrew McHattie, editor, Investment Trust Newsletter, zeroes in on a hedge fund that is prospering.

Whether or not a fan, we should imagine you have been hearing more about hedge funds and about the value of 'absolute return' mandates which do not rely on market direction to deliver performance. You may prefer to stick with conventional trusts, but there is a fairly wide choice available now from this sector.

Funds of hedge funds have done a reasonable job this year of protecting value, but without creating any on average. Year-to-date, the multi-manager hedge fund trusts have on average lost 2.5% of assets (the average is damaged though by the New Star RBC Hedge 250 3X geared shares, which have fallen far more), and the single manager listed hedge funds have grown assets by 0.9%. These figures compare favorably to ordinary conventional investment trust shares, which have lost around 7.5% of their value so far in 2008. In part this is due to quite a number of the shares being denominated in euros, which helps the performance in sterling terms, but there have also been some strong performances.

BlueCrest AllBlue (LSE: BABS, formerly Close AllBlue Fund) has gained 6.4% in the YTD for its sterling shares (it also has euro and dollar share classes), and 23.4% over two years. It has been listed since May 2006, first on the AIM (the London Stock Exchange's market for small growth companies-Editor), and then more recently on the main market. It aims for consistent long-term capital growth through investing substantially all of its assets in AllBlue (or any successor vehicle of AllBlue). AllBlue is a fund which invests in a blend of relative value and macro strategies through a diversified portfolio of seven underlying BlueCrest funds: BlueCrest Capital International Limited, BlueTrend Fund Limited, BlueHaven Limited, BlueCrest Emerging Markets Fund Limited, BlueCrest Mercantile Fund Limited, BlueMatrix Fund Limited, and BlueCrest Multi Strategy Credit Fund Limited.

The managers are an English partnership with 326 employees of whom some 60 are principals. As at 1st June 2008, BlueCrest had approximately US $15.3bn of assets under management. The asset allocation process is a formal monthly process undertaken by the AllBlue committee, which reallocates capital across the various funds to seek to optimize the blend of available alpha prospectively, thereby further enhancing the potential risk/return profile. The process seems to work, and the trust has just raised extra money through a 'C' share issue.
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