Guernsey: Guernsey Manager Sees Multi-strategy Fund Buck The Trend
Last Updated: 21 November 2008

Channel Islands Alternatives (CIA), the Guernsey-based fund of hedge funds manager, is celebrating the fact that its Hurdle Fund is well into its third year of positive returns despite the challenging market conditions.

CIA launched the Hurdle Fund in July 2006. In the year to the end of October 2008, the fund has returned 3.49% against a fall of nearly 20% in the HFRX Global Hedge Fund Index. On an annualised basis, the fund has delivered returns of 10.43% compared to a decrease of 0.77% in the HFRX Global Hedge Fund Index.

"We run the fund by investing in and redeeming with a forward-looking perspective of between 3-6 months," said Nick England, fund manager of the CIA Hurdle Fund.

"This means that we are seeking to pre-empt likely scenarios and position the fund accordingly. We actively avoided the full upside of market beta in the recent period, and reallocated the fund in advance of this crisis. This has enabled us to keep producing positive returns together with much lower volatility that that of the HFRX Global Hedge Fund Index."

The success has been achieved through a lower annualised volatility of 3.19% for the Hurdle Fund against 7.21% for the HFRX Global Hedge Fund Index. The fund invests across a wide variety of asset classes, strategies and investment time frames and is currently invested in funds that demonstrate genuine defensive qualities during difficult market conditions. The fund’s current strategy allocation is: Equity long/short – 21.6%; Freight – 18%; Property – 13.4%; Natural Resources, Macro and CTA – 7.7%, 7.6% and 6.6% respectively and Currency, Volatility Arbitrage and Commodities approximately 13%. At present the fund is fully invested with no exposure to cash.

Mr England said that the Hurdle Fund’s success was also due to recruiting the right managers and being more nimble with investments than larger players.

With a solid track record of more than two years, the CIA Hurdle Fund is now opening to investors outside its initial core base.

Mr England added: "We expect a considerable growth in AUM as investors move their assets from failing funds into the funds of funds which keep providing decent returns and adding alpha, despite current sever market conditions."

In terms of fee structure, a management fee of 1% is only payable if annualised returns of the fund exceed 4%. A performance fee of 10% is only payable on annualised returns in excess of 5%.

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