Ermitage has been appointed by the UK division of a leading international insurance group to manage a customised fund of hedge funds portfolio. Funded at the start of April 2010, the portfolio has been created to assist the client in managing its insurance liabilities and aims to provide robust, risk-adjusted performance across a variety of investment scenarios.
Created using Ermitage’s proprietary OPTICS portfolio construction system, the portfolio has been designed to provide low correlation to bond and equity market beta and achieve capital preservation should extreme market conditions persist. Reflecting this and the requirement for a high level of liquidity, the portfolio includes allocations to long/short equity, directional and fixed income hedge fund strategies.
Commenting on the mandate Jonathan Wauton, Ermitage’s Chief Investment Officer & MD of Hedge Fund Investments said:
“We are delighted to have been selected to manage this significant hedge fund mandate and look forward to working in close partnership with both the client and their consultant to deliver an effective long term solution. Over the last year we have detected a growing trend amongst sophisticated institutional investors wishing to access ‘controlled investment programmes’, where the return from the portfolio is not hostage to wild fluctuations in the major equity or bond markets – an objective which is closely aligned to Ermitage’s capability.
Nick Macleod, MD Investment Solutions and Head of Quantitative Research & Portfolio Construction added:
“In our view, the conventional ‘fund of funds’ approach of believing in market wizards, iconic managers and great track records, is no longer a credible option. Achieving stable long-term performance depends on your ability to carefully construct a portfolio based on understanding each hedge fund’s expertise – and how its specialist approach is likely to perform across a range of market conditions. Ermitage has a fully transparent 'glass box' process that begins from an investor’s objectives and requirements. It allows clients to examine key assumptions and conclusions, and make adjustments to portfolio composition to ensure that the portfolio is well positioned to do what it is intended to do.”