What has mattered more is the performance of, and effective diversification among the four strategies. In particular manager Reza Vishkai – who once worked for “Dr Doom” economist Henry Kaufman at Salomon Brothers – accurately anticipated that the currency fund would provide a strong diversification benefit during downturns. Meanwhile, the UK equity market neutral fund has consistently stayed true to its name. The emerging market debt and credit funds have managed to capture much of the upside available in their respective markets in 2009 and 2010, resulting in double digit returns in both years.
Risk consumed by each strategy is designed to stay constant, through regular rebalancing. “Risk” for Absolute Insight is defined in terms of multiple factors – as well as volatility and Value at Risk, the concept includes downside risk, downside behaviour in extreme conditions, risk budgets, and their usage. On this last point all of the funds seem cautious.
The two UCITS that employ the commitment approach – the equity market neutral and emerging market debt funds – average gross exposures of 40-100%, and 40-150%, respectively, well within the 200% cap. The two “sophisticated” UCITS – the credit and currency funds – are also well inside their statistical risk limits.
All of this has resulted in very low volatility and a worst drawdown of 2.8% on daily data, (even lower using monthly data). Given this profile, some investors may, therefore, wish to leverage their allocations and Absolute Insight could consider creating higher risk structure for the right clients. Vishkai’s experience of building Schroders’ structured products business, however, has made him alert to the risk that increased fund dealing, occasioned by levered, capital guaranteed or CPPI products, could impose on investors and Insight has set limits on the maximum portion of its funds that can be used for implementing these types of strategies.
Key details
Fund name Absolute Insight
Management company Insight Investment
Promoter Insight Investment
Status Open
Inception date 28th February 2007
Strategy
Kind of fund Fund of Funds
Strategy group Multi-strategy
Region Global All
Asset classes Equities, currencies, sovereign bonds, credit
Particulars
Currency GBP
Share class name Class Fp
ISIN GB00B1SVX803
Bloomberg ticker FCMETAE ID
Domicile UK
Listing Not listed
Fund structure OEIC
NAV calculation Daily
Liquidity Daily
Notice (banking days) 1
Minimum investment 5,000
Min. investment currency GBP
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%
Analysis
2010 return 8.95%
Annualised return 9.12%
Annualised volatility (monthly data) 2.73%
Sharpe ratio (2%) (monthly data) 2.61
Correlation to S&P 500 (monthly data) 58.50%
Correlation to iBoxx (monthly data) -5.38%
Service providers
Administrator The Bank of New York Mellon
Custodian The Bank of New York Mellon
Auditor KPMG
Lawyer Dillon Eustace
