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Amid the current market turmoil, this is our regular report on hedge fund and alternative asset managers who are bucking the trend.

Defensive positions and meaningful hedges

Solstein Capital Partners, a multi-strategy hedge fund, returned +2.7% in March (+0.6% YTD, compared to the S&P500's -20%). Launched in August 2011, it has annualised +4.5% (net), compared to the HFRI Composite Index's +2.4%. Solstein invests predominantly in developed and select emerging markets, across sectors and market capitalizations. A portfolio includes up to fifteen investment themes, comprised of around 20-30 core securities and incorporating predominantly idiosyncratic (versus market) risk.

"When the 'chickens came home to roost' in late February, Solstein employed its risk management toolkit across client portfolios and implemented: (a) high levels of cash and defensive long positions (e.g., Treasuries, gold, low beta positions) for long-only strategies, and (b) meaningful hedges, which included short positions and options for hedged strategies," says a manager quarterly report seen by Opalesque.

Going forward, Solstein will manage its portfolios with the following game plan: mid-level gross exposure with flexible net exposure; managed fixed income, with active management of equities and a continued underweight in credit in the US; overweight Health Care, tech-related REITS, low-leverage and non-add spend Info Tech, and Staples versus an underweight/short in select Consumer Discretionary and Financials sectors; overweight short duration treasuries in the US, versus an underweight/short in high yield credit and leveraged loans; underweight emerging markets; consistently overweight to high-quality businesses; and short opportunities in companies with an accelerating degradation in business fundamentals with higher relative valuations and leverage.

Headquartered in San Francisco, Solstein Capital is an independent investment firm that concentrates capital in portfolios of high conviction, global securities. CEO/CIO Nadine Terman has more than twenty years of experience.

Nadine Terman participated in Opalesque's West Coast Roundtable in 2015 (related article here).

Stock picking in Japan

The Pelargos Japan Alpha Fund is a long/short equity fund that uses fundamental value stock picking and proprietary systematic tools. The EUR class, launched in July 2008, returned 2.6% in March, after losing 6% in February and gaining 1.7% in January (+57% ITD as at end-2019). The USD class, launched in July 2017, returned almost 3% in March, after losing almost 6% in February and gaining 1.6% in January (+7.3% ITD as at end-2019).

"Pelargos Capital specializes in Japanese equities," managing director Pieter van Putten told Opalesque. "We have been managing a long/short fund since mid-2008, and recently added a long-only fund on the back of strong performance of our long book in the hedge fund. We focus on mostly mid-cap stocks which are less researched, and apply a strong governance/engagement angle where we enter into dialogue with company management to unlock value for investors. We have had some interesting successes in this field over the past 12 months."

Pelargos Capital is based in The Netherlands. Pelargos participated in Opalesque's 2012 Netherlands Roundtable (here).

The manager will participate in the second episode of the Corona Fighters webinar series, taking place on May 19th. Details below.

Systematic evolution

ETC's Evolution strategy is up +9.5% YTD after returning +1.2% in March. It has annualised +9.5% since its August 1991 inception. The Evolution (1.2x) strategy is up +7.5% YTD after returning +0.05% in March. It has annualised +7.5% since its October 1991 inception. The programs are managed by Chicago-based Eckhardt Trading Company (ETC), a research driven manager with a systematic, technically-based, evolutionary approach to global markets, employing trend and non-trend strategies with an average trade length of nine days.

Founder William Eckhardt has developed a "Science of Trading" which has been at the root of his research for over 40 years. "He has always been focussed on volatility because understanding volatility helps significantly with risk management," a spokesperson told Opalesque. "ETC's approach from the beginning, therefore, has always been volatility first, then capture of Alpha second. Evolution was launched in 1991, so it has a long track record - importantly as an early shorter-term systematic manager not the more traditional trend manager of the period.

"The Science of Trading is an expression Bill Eckhardt coined to express the pioneering concepts he utilised to develop robust systematic investment processes. Rigorous analysis of large quantities of market data can reveal changes in market behaviour over time, thus for a systematic process to remain relevant and robust it must update, or in the case of ETC, "evolve" scientifically. The Evolution program does just that, "evolution" is an in-built systematic process stemming from Bill Eckhardt's mathematical and evolutionary biology experience."

Prior issues of The Corona Fighters Report:
Report 1; Report 2; Report 3; Report 4; Report 5; Report 6; Report 7; Report 8; Report 9; Report 10; and Report 11.

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Disclaimer: This is not investment advice. Opalesque has not verified this information and gives no warranty of accuracy or completeness. Past performance is not indicative of future results. See our Terms & Conditions for more information.

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WEBINAR:

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