Investment Strategy
The Absolute Focus Fund’s investment strategy and methodology is tried and tested. Charles Hovenden has been investing in Hedge Funds since 1993 and managing portfolios consisting entirely of hedge funds using an identical approach since the end of 1998.
The Absolute Focus Fund invests in equity-related strategies. It has a more concentrated portfolio than the Absolute Fund, but employs the same rigorous investment methodology.
The Fund’s investment strategy incorporates the following
key aspects:
Based on experience and willingness to learn from past mistakes
Extensive diversification to reduce risk - target of
20 equally weighted underlying funds with an absolute maximum of 10% in any one fund
Top-down asset allocation
Disciplined quantitative and qualitative fund selection
Allocation to short-bias managers to preserve capital in falling markets
Avoid allocation to macro or CTA-type funds due to unpredictability of returns
Avoidance of ‘black box’ or excessively complex strategies
Avoidance of strategies based on illiquid securities (e.g. Reg D, private equity)
Preference for smaller funds which can exploit less crowded investment opportunities
No start-ups unless proven track record
Limited exposure to funds with lengthy lock-ups or restricted liquidity
Details of the fund's current strategic and geographical breakdown
are available on request.
Manager Selection
Quantitative screening of performance data to identify candidate funds
Particular focus on biggest monthly losses historically and performance in turbulent markets
Discrimination against funds which have achieved excessive returns
Scepticism and particular care exercised with funds where returns appear 'too good to be true'
Leads to shortlist of funds for further analysis
Intensive due diligence of short-listed funds
- Intensive and frequent interviews with selected and short-listed managers, backed up by regular telephone contact
- ongoing monitoring of funds to check for style drift
- verification of track records from administrators/prime brokers
Discrimination against managers who offer poor transparency/disclosure or use high levels of leverage
Preference for medium-sized funds where the Fund’s investment will secure a close manager relationship and regular direct contact
