Bestinvest says
This fund made headlines in 2006 when it became the first to take advantage of the UCITS III regulations to provide long / short equity exposure to UK retail investors – previously these strategies were only available via hedge funds. This is a more conservative offering in the sector, with the low leverage and 50% exposure to pair trades leading to low volatility. Overall the manager has delivered on the performance objective since launch, though returns have moderated since the banking crisis and there are now other successful funds available in the sector.
The fund’s investment universe is the FTSE All Share, plus AiM, though the bulk of the portfolio will comprise FTSE 350 stocks. The manager will hold traditional long positions – buying shares he expects to rise in value – as well as short positions – selling companies he does not own in order to benefit from an expected fall in price. Pair trades – combinations of long and short positions in similar companies - will also be included. The idea is to benefit from relative differences in their performance, regardless of whether they rise or fall. Market exposure for the aggregate portfolio is typically between -10% and 20%. Positions are primarily held via Contracts for Difference (CFDs) rather than directly in the equities. Index futures may be used to regulate overall market exposure. Up to 100% of the portfolio may be in cash, though this is principally to cover open derivative positions.
The manager applies a pragmatic approach to stock selection, combining macroeconomics with fundamental stockpicking. He identifies changes to growth rate, risk profile and investor perspective and uses proprietary spreadsheets to aid analysis. The aim is to identify a catalyst that might unlock value (or destroy value in the case of a short holding).