Long/short equity fund Chahine Mega Cap, Europe Alpha as the name suggests, focuses on the largest 200 companies in Europe, including Norway and Switzerland. The liquidity of the portfolio is therefore not in doubt and the vehicle offers monthly dealing. Quarterly rebalancing of the investment universe allows some headroom so that the fund need not prematurely take profits on shorts. Yet the portfolio itself is turned over far more often: on average 50 times a year, or once a week.
Presently the fund has 39 longs and 39 shorts and it is constrained to be sector neutral, to isolate alpha from stock selection. The fund, which launched September 2009, can have biases to particular countries as a consequence of stock selection. These country biases lay behind the sideways performance in 2010, which saw the widest ever divergences between performances of European stock-markets. By contrast 2011 has been far better, as the strategy has thrived on the choppy, risk-on, risk-off market dynamics this year.
Gross exposure can go as high as 400% but is usually around the 200% level. Net exposure ranges from 0% to 30% and is currently 24% in raw terms. On a beta adjusted basis, however, the figure drops to 15% since shorts tend to be higher beta than longs. Mega Cap has undershot its own volatility target of 10%, which is itself half that for UCITS funds that abide by absolute volatility limits.
Being broadly market neutral leaves plenty of unencumbered cash, and fund manager Julien Bernier views this as a source of additional returns: cash has been invested in investment grade corporate credit. Bernier and assistant portfolio manager Jean-Baptiste Fargeau can increase their minority ownership stakes in Chahine if performance targets are met. The two are also tactically and opportunistically sub-allocating around 24% of the fund to its long only vehicles, the momentum-driven Digital Stars Europe, which has outpaced large and small cap European equity indices by a large margin from its inception in 1998. Historically, Digital Stars has profited from growth stories including wind turbine maker Vestas of Denmark, and Germany’s Solarworld.
Key details
Fund name: Chahine MegaCap Europe Alpha
Management company: J. Chahine Capital
Promoter: J. Chahine Capital
Status: Open
Inception date: 3rd September 2009
Strategy
Kind of fund: Hedge Fund
Strategy group: Long/Short
Sub-strategy: Systematic
Region: Europe All
Asset classes: Equities
Particulars
Currency: EUR
Share class name: EUR
ISIN: LU0444605488
Bloomberg ticker: CHAMCEA LX
Domicile: Luxembourg
Listing: Luxembourg Stock Exchange
Fund structure: SICAV - SIF
NAV calculation: Monthly
Liquidity: Monthly (not UCITS)
Notice (banking days): 12
Min. investment currency: EUR
Income: Accumulative
Fees
Entry fee: 0%
Exit fee: 1.5%
Management fee: 1%
Performance fee: 20%
High water mark: Yes
Hurdle rate: Yes
Hurdle: Eonia
Analysis
Year to Date: 8.27%
2010 return: -1.46%
Annualised return: 4.68%
Annualised volatility (monthly): 5.42%
Sharpe ratio (2%) (monthly): 0.50
Correlation to S&P 500 (monthly): 10.36%
Correlation to DJ CBOT Treasury (monthly): 19.12%
