Since the launch of the UCITS version in February 2010, the fund has raised over $130 million. According to Magnus Spence, partner at Dalton Strategic Partnership , investors are seeking a solid but conservative return profile from funds like this, with minimal volatility.
The portfolio is focused on well-run businesses for the long side of its book, and quite the opposite on the short side. The offshore version navigated the crisis of 2008 on the strength of its manager’s ability to do both of these well.
Fund manager Leonard Charlton has plenty of experience running a short book, and invests considerable time in this side of the portfolio. It is not something everyone can do, he says. “It is uncommon for a fund to derive positive alpha from shorting,” he says. “It’s what makes us stand out.”
The fund can be +/- 20% net long or short. In 2006-07 it was net long on average, before switching to a net short position of approximately 10% in 2008. By April 2010 it had moved back to a net long position, although in the last few weeks is back to net short.
This is illustrative of how comfortable Charlton is with running his short book.
The fund is also liquid: stocks usually have to have a free float market capitalisation of €250 million, and the manager is confident he can exit 80% of his positions within five trading days should he be required to do so. The fund avoids sectors that require specialist knowledge, for example biotechnology and technology. Emphasis is placed on traditional businesses.
The fund will typically hold between 40 and 60 stocks. The average holding period on the long side is two to three months, with slightly longer (three to four months) on the short side.
About the managers
Leonard Charlton joined Dalton Strategic Partnership in 2006. He was previously with GLG, where he was co-manager of the firm’s European Opportunities Fund. He has 12 years of experience in the asset management industry.
Key details
Fund name Melchior Selected Trust European Absolute Return Fund
Management company Dalton Strategic Partnership
Promoter Dalton Strategic Partnership
Status Open
Inception date 2nd February 2010
Strategy
Kind of fund Hedge Fund
Strategy group Relative Value
Sub strategy Discretionary
Region Europe All
Asset classes Equities
Particulars
Currency EUR, USD, GBP
Share class name B1 EUR
ISIN LU0476438642
Bloomberg ticker MELEUB1 LX
Domicile Luxembourg
Listing Luxembourg Stock Exchange
Fund structure SICAV
NAV calculation Daily
Liquidity Daily
Notice (banking days) 1
Minimum investment 250,000
Minimum retail 10,000
Min. investment currency USD
Fees
Entry fee 0%
Exit fee 0%
Management fee 1.5%
Performance fee 20%
High water mark Yes
Hurdle rate Yes
Hurdle Euribor 1m
Analysis
Current YTD 8.82%
Annualised return 10.76%
Annualised volatility 4.26%
Sharpe ratio (2%) 2.05
Correlation to S&P 500 -2.72%
Correlation to iBoxx 24.49%
Service providers
Administrator Banque Privee Edmund de Rothschild
Custodian Banque Privee Edmund de Rothschild
Auditor Ernst & Young
