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‘Equity l/s and event-driven strategies to do well’ in 2011 says Alix Capital’s Zanolin

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As one of the key benchmark providers of UCITS-III hedge funds, UCITS Alternative Index, managed by Geneva-based Alix Capital SA has a front row seat when it comes to assessing the

As one of the key benchmark providers of UCITS-III hedge funds, UCITS Alternative Index, managed by Geneva-based Alix Capital SA has a front row seat when it comes to assessing the performance of newcits in 2010. To that end, HedgeWeek took the opportunity to speak with Alix Capital’s CEO, Louis Zanolin, to get his outlook for 2011, as well as his thoughts on last year. “2010 was difficult, overall the UCITS Alternative Index Global gained only +1.86 per cent,” said Zanolin. “There weren’t many strong trends and that’s the main reason why newcits didn’t perform that well. There was some dispersion but most managers were risk averse.” In 2008, Zanolin said that drawdowns in newcits were lower than offshore investments because by construction funds were invested in liquid instruments, and that a return to normality was observed in 2009 with the global index finishing +9.26 per cent.

Not so for 2010, with Zanolin confirming that “every month we saw one or two funds exiting the market”. It’s a trend that he expects to continue throughout 2011, despite the newcits universe growing month-on-month. “One shouldn’t forget that 50 per cent of newcits have less than EUR50million in AUM and 25 per cent have less than EUR20million,” Zanolin added. “Fund costs are much greater in relative terms for those smaller funds. With the Index, we can watch AUM drop every step of the way. When it does, we hear managers saying they’re closing or merging the fund. In offshore funds, if AUM drops the manager stops reporting to the index so you never capture the full picture. With the UCITS Alternative Index we can track them until they cease to exist. That’s why our Index doesn’t suffer from the same biases (such as survivorship bias) as offshore hedge fund indices.”

Zanolin also believes that, in terms of overall costs, there shouldn’t be any meaningful differences in performance between offshore and onshore funds: “Any differences are a result of positioning of the product not cost.” As to which strategies might do well, Zanolin opines that 2011 will be a “good year for equity l/s, event-driven, macro and emerging market strategies”. “People I’ve spoken to are quietly optimistic on equities markets so I expect equity l/s and macro strategies to do well, maybe less so for fixed income,” said Zanolin. “I expect the UCITS Alternative Index Global to finish around 6 per cent to 8 per cent this year.”
 

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