Hermes BPK Partners, the USD2.3 billion alternative advisory boutique and fund of hedge funds manager, has launched Alpha Vault Managed Futures (Alpha Vault) with USD275 million of investment.
The alternative investment managed account solution is designed to provide portfolio protection to institutional investors during periods of market turbulence through concentrated investments in the medium term Commodity Trading Advisors (CTAs) space and has been developed following discussions with institutional clients throughout 2011.
This investment solution uses CTAs, also known as Managed Futures programs, to profit from upward and downward price trends in the liquid global futures markets. Through strict risk and rules-based controls, trend-following CTAs limit losses in non-trending markets by using systematic stop losses while attempting to capture prominent moves in well trending markets through proprietary trading models. The persistence of the trend, in either direction, is the key to success.
Alpha Vault is consistent with Hermes BPK’s commitment to investor alignment and engagement. The managed account platform seeks to add value through innovative performance fee models, high levels of transparency and increased liquidity. Further to this, Hermes BPK will also be using the flexibility of the platform to customise additional portfolio solutions using accretive overlays which they believe will become an increasing growth area for the business.
Matteo Dante Perruccio (pictured), CEO and Founding Partner of Hermes BPK Partners, says: “While CTAs can be volatile, they have very strong diversifying properties with historically high negative correlation to rapidly declining equity markets. These characteristics were clearly visible in 2008 when managed futures programs returned 18% on average despite over 30% declines in global equity markets. In today’s volatile markets, the fear of missing a prolonged uptrend or being hit by a major down-market move makes CTAs a compelling tool for hedging out part of that potential market risk.”
“Alpha Vault provides investors with access to those CTA managers focused on trend following strategies who we believe are best positioned to capture greater returns in trending markets than their peers. Our approach is to combine a small number of these managers to provide a degree of convexity, that is, greater upside potential during trending markets combined with a degree of downside protection in non-trending markets.”
The launch of the Alpha Vault solution follows the launch of Hermes BPK Global Equity Hedge Strategies, a USD550m customised solution designed to help corporate pension schemes de-risk their long equity exposures through the use of long/short equity funds, taking Hermes BPK’s assets to over USD2.3bn.
As an endorsement of its solutions-driven approach, in March of 2011, the team was awarded Hedge Fund of Funds Manager of the Year at the Global Pensions Awards.