Hume Capital is to launch an absolute return fund by early next year.
Hume set the launch in the context of the tapering of quantitative easing, noting that the withdrawal of such support could shake all asset classes.
To distinguish its own absolute return fund, and recognising the poor record of many others, Hume has emphasised its value bias. ‘Unfortunately many absolute return or market neutral fund investors have suffered badly in volatile markets,’ said Sam Batcharj, Hume’s marketing director.
‘Excuses are given: crowded trades, portfolio commonality, liquidity withdrawal and redemptions to name a few. We believe that our approach of analysing and factoring in the leverage of company balance sheets identifies more meaningful valuation discounts and far more robust hedging ratios.’
Batcharj added: ‘The more mainstream conventional valuation techniques, using measures such as price to book, generate a bias to owning more leveraged companies. These tend to be under hedged fundamentally, thereby concealing a long portfolio exposure that will suffer more than expected in market drawdowns.’
Managed by Mark Baker – who co-founded Eriswell Capital, a multi-strategy hedge fund – the Hume product will employ pair trades to exploit such anomalies.
Hume is developing the fund with Phoenix Fund Services, and has £10 million of committed assets. With a Ucits structure, it is expected to have a £1,000 minimum investment; Hume has yet to finalise the fund’s fees.