Altin Rewarded For Big Position In Two Sigma Compass

By Hedge Fund Insight staff

The portfolio of ALTIN AG , the Swiss alternative investment company listed on the London and Swiss stock exchanges, is well diversified as it contains 40 hedge funds. That degree of diversification is unnecessary from the academic perspective, but does minimise blow-up risk.  There are, however, a number of significant manager/fund bets.

The largest positions in ALTIN AG at the end of the 1Q 2016 were:

Two Sigma Compass Enhanced Cayman Fund Ltd   8.13%
Citadel Kensington Global Strategies Fund Ltd   6.23%
ZP Offshore Utility Fund Ltd   5.77%
Stratus Feeder Ltd   4.98%
York European Focus Unit Trust   4.55%
Millennium International   4.49%
Jana Nirvana Offshore Fund Ltd   4.46%
Verrazzano European Focus Fund PLC   4.09%

Logically, the largest positions are highly likely to be the biggest contributors to performance, both positive and negative.  Indeed that has been the case for ALTIN so far in 2016:

There are a further three noteworthy points on the ALTIN portfolio: a high trust factor for one management firm in particular, on liquidity and on leverage. Amongst the 40 funds only one hedge fund management firm is represented by two funds. That firm is John Overdeck’s Two Sigma Investments. ALTIN AG has a 3.4% holding in the Two Sigma Absolute Return Equity Enhanced Cayman Fund as well as the 8% holding in Two Sigma’s Compass Fund.
ALTIN AG’s quarterly press release gives a breakdown of the portfolio liquidity. Thanks to the permanent capital base provided by its structure, the ALTIN portfolio can be allocated to funds that require a slightly longer lock-up but offer potentially higher returns, without incurring any liquidity mismatch. The portfolio remains however highly liquid, with 65.39% of assets invested in funds with monthly or better liquidity, allowing the manager to make allocation shifts when deemed necessary.

Asset Allocation according to redemption frequency (including remaining lock-ups) as at 1 April 2016

Leverage

The final point on ALTIN’s portfolio follows on from the above table. The fund contains leverage in at least two forms. The ALTIN AG portfolio of funds is leveraged – there is 127.62% exposure to hedge fund returns for the 100% of equity. For reference, a year ago the leverage was 124.12%, and two years ago it was 127.83%. That is the current level of leverage is normal for the Fund and does not indicate a specific view of short term opportunity or risk.

And there is also leverage at the level of the individual funds. Obviously some strategies require that – market-neutral quant funds, CTAs and merger arb funds are all leveraged at the portfolio level because the natural return is not attractive otherwise.  Rather, Tony Morrongiello, the ALTIN CEO, has chosen share classes with embedded leverage for a number of fund holdings in these strategy groupings:

Macro

Cumulus Fund Leveraged 3.15%

Two Sigma Compass Enhanced Cayman Fund Ltd 8.13%

Event Driven

Paulson Enhanced Ltd1.83%

Relative Value

Acadian Global Leveraged Market Neutral Equity UCITS 3.05%

Atlas Enhanced Fund Ltd 2.91%

Two Sigma Absolute Return Equity Enhanced Cayman Fund Ltd 3.40%

You can see all the holdings of ALTIN AG and read the manager’s performance report for the 1Q on the website of the London Stock Exchange here: http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/AIA/12783734.html

related articles:

ALTIN’s Board Does It’s Job And Deserves Support (Feb 2016)

Altin Drops Comac for Tudor and Stone Milliner and Adds to CTA Exposure Through Bluetrend (Sep 2013)

Syz’s Altin Zigs When Others Zag (Apr 2011)