Sabre Fund Management is one of London’s most well established hedge fund managers, having launched its flagship market neutral Sabre Style Arbitrage Fund in 2002 and the newer Dynamic Equity Strategy in 2013. The firm is steered by Melissa Hill, CEO, who joined the firm in 1996.
Leading the investment process is Dan Jelicic. Dan joined Sabre in 2002 to manage the Style Arbitrage Fund and today he drives the investment process utilised in Sabre’s Style strategies.
Like many statistical arbitrage funds, Sabre Style Arbitrage is market agnostic.
The Sabre Style Arbitrage Fund was launched in August 2002. This systematic fund dynamically combines factor and statistical arbitrage models to exploit trending and mean reverting behaviour in stocks. The portfolio comprises approximately 800 of the most liquid stocks drawn from the FTSE250, the DJ Stoxx 600 and the S&P 500.
Reflecting on last year, Hill says it was an “ideal year” for the strategy.
“We saw considerable variation in style behaviour throughout the year, with most styles contributing positively and only Value underperforming. Our dynamic models are adept at capturing changing style sentiment, leading to a 12 per cent return and a Sharpe ratio of 2.8 for 2017,” comments Hill.
At the heart of the fund’s ‘style investing’ philosophy is the aim to diversify risk and maximise returns. Multiple style-factor portfolios are constructed and combined with technical models that reduce exposure at times of factor stress. Portfolio construction is similar to a fund of funds owing to the fact that the core style factor portfolios have a reasonably low correlation with each other.
Sabre’s portfolio aims to capture the styles rewarded as a result of the long-term economic trends in markets but also the short-term trends driven by investor behaviour. Whatever investment style develops in the markets, the fund’s proprietary models can adapt accordingly.
Hill explains that Sabre’s Information Advantage models performed very well in 2017. These are proprietary models, formed using a data set Sabre has been building internally since 2002.
“Our models are weighted according to how they have performed in the past and then refined with a tilt to what is being rewarded now. However, these Information Advantage models account for a large part of the Fund’s total return and so typically have a fairly consistent weight allocated to them. Earnings Momentum and Quality also did well in 2017,” says Hill.
One of the main benefits available to investors holding systematic market neutral funds in their portfolios is to improve diversification with de minimis market beta exposure i.e. to optimise their Sharpe ratio.
Commenting on building the business at Sabre, Hill said that in her view people do their best work in an environment that is intellectually competitive but one that is also able to nurture talented individuals. From a cultural perspective, Sabre has had success in bringing people into the firm early in their careers and watching them grow in the business.
“We have always been very client-centric, offering good attribution transparency and through being one of the early adopters of offering managed accounts alongside our fund range, in order to provide bespoke versions of our core strategies,” adds Hill.
On winning this year’s award, Hill remarks: “It is a great privilege to be the guardian of the Sabre team and winning this award is wonderful recognition of the hard work and innovation that goes into our investment strategies.”
