Going the Distance Missed Opportunities in Recent Years
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SPONSORED FEATURE By establishing a repeatable strategy, implemented by sense of how quickly we can shift away from risk and then bring a long-standing investment team, and emphasising it back into the portfolio,” Nolte shared responsibility with risk management and due adds. “In 2014, we probably had roughly 70% turnover – one of our diligence, SkyBridge Capital has generated impressive highest turnover years ever. This returns over the past decade. year has seen much less turnover; we’ve largely stuck with the current positioning of the fund.” In spite of this agility, however, Nolte does acknowledge some Going the distance missed opportunities in recent years. After exiting the commodity trading Consistency is key to the success of adviser space in mid-2009, SkyBridge SkyBridge Capital’s fund of hedge saw currency-oriented macro funds portfolio, according to chief managers perform extremely well investment officer and co-managing in the second half of 2014 and early partner Ray Nolte. One of the firm’s 2015. “At the time, we just didn’t offshore funds has been named Best have the confidence level that the Diversified Fund of Hedge Funds returns were stable. We also felt there over 10 years at the 2015 Hedge was a little too much central bank Funds Review Americas Awards. intervention, which would maintain The team behind the fund of funds a heightened level of volatility in has remained the same for the past that space,” Nolte says. “It looked decade since Nolte took over its like an interesting opportunity set, management while at Citigroup but we did not have a strong enough in 2005. “I revamped the team and conviction to build the positions.” the thought process around its with any preconceived notions The level of conviction behind management,” he says. “And that “We do not of how long we will stay with a the fund-of-funds’ investments same team has been executing the particular theme.” has been a crucial element of its strategy for the past decade.” invest with any The team re-evaluates the performance over the past decade. The revamp involved applying preconceived portfolio on a monthly basis and The investment, operational due a more thematic and dynamic notions of will adjust risk depending on the diligence and risk management style to fund of funds investing market environment. In developing teams all have full veto powers over by implementing a multi-strategy how long we a more equitised portfolio in early any investments. “All three teams approach. Under this method, will stay with 2013, for example, portfolio risk work very closely together, but the investment team identifies a a particular was increased to a beta of 0.5 from have independence to drive their high-conviction theme or idea and 0.2. Those positions were held until respective disciplines and use their allocates capital to fund managers on theme.” the second quarter of 2014 brought vetoes if they see anything they are a more flexible basis than traditional Ray Nolte, some market changes that convinced not comfortable with. That process fund of funds. For instance, instead SkyBridge Capital the team to pare risk back to a beta of has been in place for a decade and of investing up to 2% with each about 0.25. works well for us,” Nolte says. of 50 funds, the investment team The recent outbreak of the Ebola Ultimately, he believes the strength looks across the entire hedge fund virus, identified in West Africa in of the fund can be attributed to universe to invest as much as 40% March 2014, was one of the drivers the continuity of personnel and in a particular theme and up to 10% behind that move, having caused strategy it offers investors. “Over with an individual fund manager. concern about the potential impact the past decade, we’ve put together SkyBridge Capital took over the fund on financial markets. The team also a repeatable process and created in 2010, retaining Nolte and his team detected some government policy systems of accountability and to maintain this strategy. risk relating to tax inversion deals, responsibility throughout the due While the team has continued which many of the fund’s equity diligence and portfolio management to apply this strategy over the past managers had positions on at that process,” Nolte says. “At the end of the decade, Nolte believes the ability to time. After reassessing those risks day, this is really about the team.” ■ remain dynamic is also crucial to in late October and determining the fund’s success. “If something is that both situations were overdone, SkyBridge Capital was named Best not working, we can quickly move risk was increased again to a beta of Diversified Fund of Hedge Funds over out of that theme or investment,” 0.35 in November, which is roughly 10 years at the Hedge Funds Review he explains. “We also do not invest where it stands today. “That gives a Americas Awards 2015 Hedge Funds Review October 2015 www.risk.net.