The past 12 months proved troubling for Alternative Ucits investors with a number of those boasting absolute return remits struggling to end the year in positive territory.
Data from Lipper from Q4 of 2015 and the first half of 2016, shows that only 29.5% of the 532 funds analysed over this period showed positive returns. This is while around two-thirds posted negative risk-adjusted returns.
However, one way to combat these challenges is to allocate to event-driven exposure in portfolios, according to JP Morgan Alternative Asset Management’s head of hedge fund solutions, Karim Leguel.
‘Being overweight event driven helped us a lot this year, we picked very different managers in the equity long/short space, so there were not many crossover positions for us that were crowded, or where a lot of other alternative players were involved.’
‘In the first few months of the fund, this exposure helped us with protecting the downside. We also have a credit manager who looks specifically at liquid structured credit, which did very well during the year and helped a lot.’
‘Event driven is a strategy we like due to opportunities in US corporate activity. It is an overweight, and P. Schoenfeld Asset Management is a high conviction manager in the strategy which makes us even more comfortable. We judge managers on various measures and high conviction means we rate them highly.’
The JPMorgan Funds - Multi-Manager Alternatives fund, which was launched in January of last year, currently has around $170 million in assets under management and is managed by Paul Zummo, Randy Wachtel and Christopher Marshall and assisted by Leguel.
Leguel said the fact the fund uses a managing account underlying it, means JPM has control of the account at a SICAV level.
‘The fund is a list of securities, but then we have managed accounts where the managers are running it. It’s a transparent structure and we have control of it, we don’t need a Ucits fund to allocate, we can go to any manager and have them open an account.’
‘The current book is split between long/short equity (25.1%), relative value (19.3%), merger arbitrage/event driven (27.5%), macro/opportunist (10.7%), credit (1.4%) and cash (6.1%).’
With just one allocation to CTAs through with the Graham Capital Management: Quantitative CTA, Leguel said the sector is still beneficial to the portfolio despite having a difficult year.
‘CTAs can be a great diversifier when markets are more volatile, or perhaps when equities are suffering and other managers were having rougher months, CTAs really helped the portfolio.’
‘We are probably looking to add more to the relative value space at the moment rather than CTAs, we have identified a couple of good managers that we are working on adding.'
'Taking advantage of dispersion between asset classes and within asset classes is a good opportunity right now.’