The team attributes the strategy’s strong first year to investment allocation, as well as the quality of the managers selected. In the hedge fund space, SYZ Capital’s strong global research capabilities and solid network enables privileged access to niche investments and funds, which are otherwise closed.
Two of the team’s major conviction calls over the period surrounded Japan and convertible arbitrage.
“We have been positive on Japan since the rollout of corporate governance reforms by former Prime Minister Shinzo Abe. As these regulatory changes feed through to business mentalities, we have chosen a manager capitalising on this evolution, who has returned us more than 20%,” Vuignier says.
“Another area we have been positive on for the last three years is convertible arbitrage. We have been exposed to this type of strategy, which benefits from rises in volatility and new issuance since launch and this has contributed about 0.85% to our performance. This is one of our largest positions in a concentrated portfolio of 15 funds.”
In addition, the strategy’s inherent flexibility allowed the team to rapidly reduce strategies with higher beta as news of the spreading Covid-19 virus hit markets in February. Usually monthly committee meetings – where the portfolio management team reviews its positions, guided by the top-down macro views of Banca March – were held weekly since early March, while vigilance around liquidity was heightened.
Vuignier explains: “Traditionally, hedge fund strategies are in the business of buy and hold, but we have the ability to be active and dynamic. Although we have made a few changes since inception – owing to the quality of our research and selection – we were able to react quickly when the Covid-19 crisis hit, making some necessary changes to the portfolio. An aftermath analysis was also done, which triggered a change. We had anticipated a better resilience in drawdowns from a relative value fund. It recovered but, as it did not bring the desired level of diversification, we replaced it.”