Hilltop Fund Management has launched its London-based business and its alternative fund of hedge funds approach.
The All Weather Fund, managed by Rory Hills (pictured), is a fund of hedge funds designed to deliver consistent, absolute returns in all environments through a portfolio of uncorrelated hedge funds, unconstrained by investment style.
The fund, domiciled in Gibraltar, will invest in approximately 15 underlying hedge funds diversified by investment approach and geography.
Hilltop will pursue a bottom-up investment approach focused on fund selection rather than top-down asset allocation. The investment strategy of each underlying fund will be distinct and sufficiently differentiated to exhibit low correlation to the other funds to provide a diversification solution.
The fund’s fee structure is designed to be more fully aligned with investors’ interests. Hilltop believes that performance fees based on an annual calculation is too short a period to genuinely assess manager skill. Hilltop’s performance fees will instead have a three year high watermark and remain fully at risk throughout this period. Additionally, the fund uses a progressive hurdle rate, which increases over time depending on an investor’s duration in the fund.
Hills says: “Investors in fund of hedge funds have largely been let down: they thought they were buying uncorrelated, absolute returns but received the opposite in the crisis: highly correlated, negative returns. In 2008, over a third of single managers were up (according to Eurekahedge) yet more than 97 per cent of diversified fund of hedge funds were down (BarclayHedge). Almost all fund of hedge funds failed to do their job during the crisis in identifying the winners from the losers."
From 2002 to 2009, Hills was a director responsible for hedge fund marketing at Dexion Capital, where he held an estimated 1,000 meetings with fund of hedge fund managers.
Stephen Hedgecock, principal at Altis Partners, says: "I, together with my fellow principals at Altis Partners, am delighted to be investing in the Hilltop All Weather Fund from the start. We have known Rory since he first came to scrutinise us in 2003 and have been watching him ever since. His vision and drive, combined with a real skill for identifying talented fund managers is a great recipe for managing the All Weather Fund. We have no doubt that he will be able to provide investors not only with superior risk-adjusted returns but importantly returns which demonstrate low correlation to their other investments.”
