It’s fair to say that Optima Fund Management has seen a lot of change in the hedge fund industry, given that it has celebrated its 30th anniversary in July 2018. Since Dixon Boardman founded the New York-based firm in 1988, it has steered a steady course. It has continued to evolve in line with market trends so as to unearth the best hedge fund talent, which feature in a range of multi-manager funds, the first of which, a long/short equity FoFs, has been running since the year of Optima’s inception.
As one would expect at a FoHF firm, investment research is a fundamental skill-set that Optima’s team has built over the decades. Like an apex predator, Optima always looks forwards, never backwards. Just because a manager has had a good run of returns for one, two, three years, there is no guarantee he will remain a staple of the portfolio.
“In 2018, we have on-boarded several managers that I believe reflect Optima’s expertise in sourcing hard-to-find talent,” comments Michael Spelman, the CIO at Optima. “We strive to add a degree of uniqueness to our portfolios that larger allocation firms might have difficulty achieving due to the selectivity of underlying managers in choosing business partners and their desire to maintain a low profile.
“Within our macro fund, for example, we have hired a trader that exclusively trades power and emissions derivatives focused on northern European markets.”
This, says Spelman, is a “hard-to-master” market which requires specialised skill not only in research and risk management, “but also expertise in a policy analysis which we find that few people have”.
Within Optima’s international equity funds, it has hired an India-focused manager that has much prized “local access” in a market where gaining an edge is as much about personally knowing CEOs as it is applying high-quality financial statement analysis. “We also continue to expand our pipeline of uncorrelated strategies including quantitative equity arbitrage and “free-form” AI strategies that are geared towards less conventional sources of behavioural alpha,” adds Spelman.
Optima’s culture can best be described as quality-obsessed, risk averse and innovative (as highlighted above regarding talent sourcing). Spelman expands on the innovation point: “Our multi-manager advisory clients are increasingly concerned about late cycle markets and rising volatility so we have been working closely with them to provide custom solutions. In 2017, we developed an absolute return programme with low correlation/beta to equities and a maximum drawdown target of 5 per cent, which is based on a blend of three strategies: equity market neutral, CTA and discretionary global macro. While it is defensive in nature, the portfolio also provides a competitive return.”
Optima is a firm that invests as principals, not agents. This means building partnerships with its investors on one hand and ensuring that it underwrites durable, high-quality investments that match their needs and can stand the test of time on the other.
“We would suggest that when you put a group of highly motivated, intelligent, like-minded people together that share this common philosophy, and infuse it with rigour and the wisdom that comes from experience, then you are more likely than not to generate superior results. This is Optima’s value proposition,” asserts Spelman. n
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