“We think this is an under-serviced part of the market,” says portfolio manager Alex Veroude. “The alignment of interest is like a hedge fund with big positions being taken but the strategy is typical of what an asset manager has in their stable.”
A multi-strategy investment approach is used. Its investment universe includes investment-grade and high yield corporate debt, structured credit such as asset-backed securities, loans and cash instruments, along with a full range of derivatives such as credit default swaps on single names and indices, interest rate and inflation swaps, futures, forwards and options.
The fund employs top-down allocation overlays. At the end of 2008, for example, Veroude saw that the relative value in European credit was in ABS and quickly made a meaningful allocation to the sector. It was helped by being able to draw on a 20-strong credit research team at Insight which oversees over £31 billion in fixed income allocations.
The fund takes very limited beta risk. From its 31% return in 2010 Veroude estimates that about 25% came from alpha. “The opportunity for alpha in the wider context of the euro credit market is still healthy,” he says, adding that in the first three weeks of January the fund gained nearly 4%.
Opportunities are seen in euro convertible bonds and European ABS. The fund was active in European high yield in early January but Veroude expects there will be times when money is taken off the table. Risk management is a particularly strong point for Insight.
”Compared to hedge funds we do this much better,” Veroude says. “We can afford to have a more sophisticated independent risk management system. Management will rein back risk taking if they feel the time isn’t right for credit strategies.”
About the managers
Alex Veroude, head of credit with Insight Investment, is portfolio manager. He is backed up by head of UK credit Peter Bentley. Both men have focused on credit over their careers.
Key details
Fund name: Absolute Insight Credit Fund
Management company: Insight Investment
Promoter: Insight Investment
Status: Open
Inception date: 2nd June 2009
Strategy
Kind of fund: Absolute Return
Strategy group: Long/Short
Region: Global All
Asset classes: Credit, Loans
Particulars
Currency: GBP, EUR
Share class name: Class B1p GBP
ISIN: IE00B3CLDP79
Domicile: Ireland
Listing: Irish Stock Exchange
Fund structure: OEIC (UCITS)
NAV calculation: Weekly
Liquidity: Weekly
Day (if not daily): Wednesday
Notice (banking days): 1
Minimum investment: 3,000
Min. investment currency: GBP, EUR
Income: Accumulative
Fees
Entry fee: 4%
Exit fee: 0%
Management fee: 1%
Performance fee: 10%
High water mark: Yes
Hurdle rate: Yes
Hurdle: Libor GBP 3m -0.125%, 3 month GBP LIBID
Analysis
2010 return: 8.16%
Annualised return: 8.22%
Annualised volatility (monthly data): 5.82%
Sharpe ratio (2%) (monthly data): 1.07
Correlation to S&P 500 (monthly data): -5.71%
Correlation to iBoxx (monthly data): 46.71%
Service providers
Administrator: State Street Fund Services
Custodian: State Street Custodial Services
Auditor: KPMG
Lawyer: Dillon Eustace
