Highbridge Multi-Strategy Fund Assets Fall In 2018, Realigns Portfolio

LONDON (Alliance News) - Highbridge Multi-Strategy Fund Ltd on Tuesday reported a slip in net ...

Alliance News 16 April, 2019 | 11:25AM
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LONDON (Alliance News) - Highbridge Multi-Strategy Fund Ltd on Tuesday reported a slip in net asset value per share on increased market volatility but managed to outperform its benchmark.

At December 31, Highbridge's NAV per share stood at GBP2.1518 compared to GBP2.1960 the year before, 2.0% decrease.

The fund's net asset value increased 5.9% in the period, however, rising to USD226.8 million from USD214.2 million, as Highbridge issued 8.4 million shares out of treasury in 2018.

The fund's NAV total return in 2018 was negative 2.0% but said it managed a 1.3% outperformance of its benchmark, the HFRI Fund of Funds Diversified index.

"2018 has been a very difficult year for hedge funds. The asset class had its worst performance since the 2008 global financial crisis. Whilst the company was not able to avoid a negative return in 2018, its NAV performance was significantly better than the HFRI Fund of Funds Diversified Index and the FTSE 100 which lost 12.5%," said Chair Vic Holmes.

The fund incorporates a master-feeder structure by investing substantially all of its assets in an underlying multi-strategy fund managed by Highbridge Capital Management. The underlying fund pursues equity, credit, convertible bond, volatility, capital structure arbitrage and macro opportunities.

The investment manager said: "For the year, the underlying fund's fundamental equity strategies namely: Sector-Focused Long/Short Equity Strategies and Convergence Long/Short Equity - detracted the most from performance. The largest contributors to underlying fund performance were Equity Capital Markets and Merger Arbitrage, followed by Convertible Credit & Capital Structure Arbitrage."

The investment manager said 2018 was a "year-long effort" to realign its investment strategy to shift capital between its investment teams. In particular, the fund has set itself up to "favour relative value strategies that can capture volatility through active trading".

Highbridge Capital Management said: "To implement this change, we eliminated several strategies that in our view contributed significant risk to the underlying fund without demonstrating a commensurate return, most notably the Sector-Focused Long/Short Equity strategies and Statistical Arbitrage. Importantly, in addition to these eliminations, new teams were hired and capital was added to strategies better suited to capture current market opportunities and leverage the Underlying Fund's investing strengths. Convergence Long/Short Equity was the most significant strategy addition."

Looking ahead, the investment manager expects markets to remain "volatile" and corporate earnings "pose a greater threat now than this time last year", with global political risks remaining "high".

The investment manager added: "From an investment perspective, we strive to keep the Underlying Fund's market beta on the low end of target with the expectation that there will be ongoing bouts of volatility. In many cases, credit has underperformed its underlying equity, which can create dislocation opportunities for our Cross Asset Relative Value and Convertible Credit and Capital Structure Arbitrage strategies and we therefore have increased the weighting of both in our portfolio. Regardless of how the abundance of macro risks on the horizon plays out, it should create opportunities for our relative value strategies."

Highbridge said the realignment has resulted in a 3% increase in NAV per share in the first quarter of 2019.

Shares in Highbridge Multi-Strategy were down 0.7% Tuesday at 212.51 pence each.

By Paul McGowan; paulmcgowan@alliancenews.com

Copyright 2019 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article
Security Name Price Change (%) Morningstar Rating
Highbridge Multi-Strategy Fund GBP 216.00 GBX -0.46 -
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