The objective is to achieve attractive risk adjusted returns over time, both in absolute terms and relative to the hedge fund market. The portfolio is benchmarked against a conservative hedge fund index.
We aim to construct a portfolio of hedge funds which is well diversified across strategies and factors influencing the funds. The long-term nature of our capital enables us to invest across the liquidity spectrum depending on where we see best opportunities. We are mindful about Ferd's substantial exposure to stock market factors, and the portfolio will normally have a relatively small exposure to funds with a significant net exposure to the equity market.
We have a long-standing relationship with Albourne Partners Limited and their resources are used actively in the investment process.
The investment process starts with a review of the investment returns achieved by a large selection of hedge funds. We conduct regular screens based on quantitative measures and combine this with sourcing capabilities through our network.
In the analysis process, we assess the fund’s investment strategy and evaluate the fund’s opportunity set and return potential. We also analyze the source of historical returns, with a particular focus on separating performance generated by various market exposure and performance driven by the manager's skill. The historical performance is also reviewed in the context of the current attributes of the fund, and central elements taken into account are changes in the investment strategy and investment team. We also evaluate the fund's attractiveness in a portfolio context to identify the diversification benefit of including the fund into the hedge fund portfolio.
Review of the fund's structure and operational aspects are also an integral part of the process. We assess whether the fund's liquidity terms are reasonable given the fund's strategy, and if valuation aspects are deemed satisfactory to ensure fair treatment across clients. In addition, thorough operational due diligence is carried out by Ferd's external hedge fund advisor on funds in which Ferd is considering an investment.