This article was originally published on 17 January 2008.
A Guernsey fund of funds has delivered positive performances in every month of its first full calendar year of trading despite significant market turbulence during the second six months of 2007.
The Hurdle Fund is managed by Guernsey-based Channel Islands Alternatives (CIA) and takes its name from the fact that the investment manager only charges fees if the annualised returns are in excess of 4% a year.
In 2007 the fund delivered an estimated return of 11.89% on the year. It has a volatility of 3.21% and a Sharpe ratio1 of 2.2.
"Given the difficult trading conditions in the second half of 2007 it was quite an achievement to post such results. Generating this very high quality risk adjusted return reflects our objective approach to fund management," said CIAs Director Nick England.
The fund focuses on generating absolute returns by controlling risk through manager diversification and avoiding a high correlation with global equity markets.
Mr England said: "Many managers often have higher correlations to the equity markets than they think and this serves to undermine the absolute return credentials of their fund of funds. As an example, both August and November last year were very difficult markets for equities and hedge funds in general whereas the monthly returns for The Hurdle Fund classes were all positive."
He added that his trading experience has allowed the fund to be constructed in a defensive manner that most other fund of funds would struggle to achieve.
Mr England has returned home to Guernsey with his family following 17 years trading derivatives on the exchanges in London.
He said: "It is very important for me to be close to the people I work with, whether it is the service providers or the traders trading the funds invested capital and therefore locating the business in Guernsey was a natural choice. In addition, Guernseys strong administration and regulatory framework made it particularly attractive to domicile The Hurdle Fund here in the Island."
Guernsey based service providers to the fund include administrators Trident Trust, Butterfield Bank as custodians and auditors Deloitte.
Peter Niven, Chief Executive of GuernseyFinance the promotional agency for the Islands finance industry, added: "It is very positive to see that managers setting up in Guernsey are supported by the broad range of professional services that are resident on the Island. What is even more important is the fact that greater numbers of high quality managers are setting up in Guernsey and delivering high quality returns such as those achieved by The Hurdle Fund."
Mr England said that structuring the fund as a Protected Cell Company (PCC) a concept pioneered in Guernsey was a cost effective and efficient way to establish a core fund and feeder (currency) cells.
Footnotes
1 The Sharpe ratio is a ratio that shows the amount of return (in excess of the risk free rate) for a unit of risk undertaken.
Guernseys investment funds industry: Overall fund business in Guernsey grew by £8.9bn (5.7%) in the three months to the end of September despite significant market turbulence during the quarter. That took the total value of funds under management and administration to a new high of £164.5bn an increase of £44bn (36.5%) year on year.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com .
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