NEWS - 25

Viennese firm seeks hedge fund and fund of fund acquisitions

Sep 17, 2012, By Beverly Chandler

(LEFT TO RIGHT) Jim Cone, Michael Browne, Marc de Kloe, Kathryn Kaminski, Oliver Prock, Anthony Torriani, Matthias Knab

Oliver Prock, chief executive officer and chief investment officer of Vienna and Liechstenstein based Salus Alpha Group AG is in the market to buy other alternatives businesses. In an interview with Opalesque, Prock said: "We are interested in buying other businesses, either funds of funds run by people that are done with the business and want to have a change, or maybe single strategy funds of any type where there is a problem with distribution or marketing."

The firm was founded in 2001 by Prock and a team from Erste Bank in Vienna, where they had been responsible for funds of funds and other alternatives.

Prock says: "We felt that the offshore structures for the domestic market that were being offered would be under siege in the future, so our business plan was to create onshore daily liquid products."

This they did by bringing out a UCITS I hedge fund based fund. "We were the first to offer an alternative UCITS in 2003" Prock says. The firm has now grown to 50 people and funds under management of $1bn, with offices worldwide in Vienna, Liechtenstein, India, Stockholm and Hong Kong among other places.

They now focus on specialised funds, structured products and managed accounts for institutions such as pension funds, insurance companies and family offices. The firm started with the retail product UCITS, "because there was no choice of professional UCITS funds so we started with UCITS for all our clientele", Prock says.

Early days saw the firm offering a fund of funds and in-house managing investment strategies as managed accounts. "We didn’t actively market them" says Prock. "When UCITS I became UCITS III, it became possible to have it in an index format so we moved the in-house strategies from their managed account structure to a publicly available UCITS fund in 2007." Their flagship fund, the Directional Markets fund has been running since 2003, firstly as a managed account and then as a fund from 1st December 2008, with an annualised return of 15% since 2003. It is based on a quantitative research model derived by the firm’s research team in Vienna, Liechtenstein and India and it is registered in Vienna.

"It is a CTA portfolio managed on a quantitative basis, covering bonds, equities, commodities and so on but the difference is that there is no technical analysis involved – it is based purely on statistics and price forecasting" Prock says.

The fund’s prospectus lists assets selected for Salus Alpha Directional Markets as predominantly financial indices employing the commodity trading advisors (CTA) management strategy. Shares in investment funds may amount to a maximum of 10% of Salus Alpha Directional Markets’ fund assets and according to the investment strategy, money market instruments may comprise up to 100% of the fund assets.

The fund has a Sharpe ratio of above 1, meaning that for every 1% of return, the fund is taking less than 1% of risk. It has a 34% correlation with Winton, according to Prock. Salus Alpha has a European passport through its Liechtenstein license and plans, according to Prock, to move into the US sometime in the future.

Salus Alpha sponsored and attended the recent Opalesque Roundtable in Monaco. 

NEWS - 16

Salus Alpha products outperform equity markets

Thu, 10/11/2011

For the year up to 31/10/2011, all Salus Alpha Funds clearly outperformed global equity markets in a difficult environment.

The Salus Alpha Commodity Arbitrage had a performance of +4.84% for the year to date until , while the US S&P 500 Index lost -0.35%, and the German DAX30 index lost -11.18% in the same period. This is an outperformance against the S&P 500 Index of +5.19% and against the DAX 30 Index of +16.02%.

In such a difficult market environment, this outperformance results from the employment of an active management approach and from the diversification over numerous strategies and substrategies.

The Salus Alpha RN Special Situations had a performance of +3.76% for the month to date.

The Salus Alpha Real Estate had a performance of +1.98% for the month to date. Salus Alpha Real Estate is a single manager single strategy fund, which invests according to Salus Alpha’s proprietary Global Real Estate Model. The fund currently has an exposure of 100% to the Real Estate markets. Salus Alpha Real Estate has been awarded a 5 Star Rating by www.fondsprofessionell.de for its exceptional performance since inception on 21 January 2008. The fund outperformed the EPRA/NAREIT Real Estate Index by +23.14% in this timespan.

The Salus Alpha Event Driven had a performance of +0.72% for the month to date; the Salus Alpha Multi Style had a performance of +0.72% for the month to date; the Salus Alpha Managed Futures had a performance of -0.18% for the month to date; and the Salus Alpha Directional Markets had a performance of -1.00% for the month to date.

The Salus Alpha Equity Hedged had a performance of +3.18% for the year to date until 10/31/2011, outperforming the S&P 500 Index by +3.53%. The Salus Alpha Equity Hedged currently has a 14% exposure to Long Bias, 34% to Market Neutral, 22% to Long Short Variable Bias,  and 30% to Short Bias.

The Salus Alpha Commodity Arbitrage had a performance of +4.84% for the year to date until 10/31/2011, outperforming the S&P 500 Index by +5.19%. The fund outperformed the S&P GSCI Index by 2.29%, which booked a gain of 2.55% in the reporting period. The 12 month rolling alpha of Salus Alpha Commodity Arbitrage to the S&P500 is 4% p.a., the 12 month rolling beta is currently -0.1. This implies that in the past 12 months, the Salus Alpha Commodity Arbitrage had a return of 4% due to active management (alpha).

Salus Alpha Commodity Arbitrage tracks the CAX - Commodity Arbitrage Index. The CAX Index covers the performance of arbitrage strategies, which aim to extract consistent market neutral returns from valuation inefficiencies arising among related commodities - like for example Brent Crude vs. WTI Light Sweet Crude - or among different maturities of futures contracts on one commodity due to Contango, Backwardation and Seasonality.

Contango denotes a market situation where longer-dated commodity futures are priced higher than shorter-dated commodity futures. Markets in contango are characterised by low demand relative to available supply. In these markets, investors holding a long position suffer a roll loss when selling expiring contracts at low prices, and buying new contracts as higher prices. The CAX Index currently has a 10.00% spread position in Wheat, which is currently 24.70% p.a. contangoed.

NEWS - 12

Salus Alpha products outperform equity markets

Mon, 12/09/2011

For the year to 31 August 2011, all Salus Alpha Funds clearly outperformed global equity markets in a difficult environment.

The Salus Alpha Commodity Arbitrage had a performance of +9.13% for the year , while the US S&P 500 Index lost 3.08%, and the German DAX30 index lost 16.33% in the same period. This is an outperformance against the S&P 500 Index of +12.21% and against the DAX 30 Index of +25.46%.

Other products managed by Salus Alpha performed as follows for the year to date until 8/31/2011:  

Salus Alpha Commodity Arbitrage: +9.13% 

Salus Alpha Equity Hedged: +6.34% 

Salus Alpha Event Driven: +2.49%  

In such a difficult market environment, this outperformance results from the employment of an active management approach and from the diversification over numerous strategies and substrategies.

The Salus Alpha Real Estate had a performance of +0.68% for the month to date, outperforming the EPRA / NAREIT Index by +8.93%. The 12 month rolling alpha of Salus Alpha Real Estate to the Epra/Nareit Europe Index  is 7% p.a., the 12 month rolling beta is currently 0.2. This implies that in the past 12 months, the fund had a return of approximately 7% due to active management (alpha), and 0.19% return due to the positive market beta.

Salus Alpha Real Estate is a single manager single strategy fund, which invests according to Salus Alpha’s proprietary Global Real Estate Model. The Salus Alpha Real Estate outperformed the EPRA/NAREIT Real Estate Index by 8.93% and the GPR 250 Europe Index by 6.14% during the month of August. The fund currently has an exposure of 42% to the Real Estate markets.

Salus Alpha Real Estate has been awarded a 5 Star Rating by www.fondsprofessionell.de for its exceptional performance since inception on 21 January 2008. The fund outperformed the EPRA/NAREIT Real Estate Index by +22.30% in this timespan.

The Salus Alpha Commodity Arbitrage had a performance of +0.38% for the month to date, outperforming the S&P 500 Index by +6.06%. The fund outperformed the S&P GSCI Index by 2.04%, which booked a loss of -1.66% in the reporting period. The 12 month rolling alpha of Salus Alpha Commodity Arbitrage to the S&P500 is 9% p.a., the 12 month rolling beta is currently 0.0. This implies that in the past 12 months, the Salus Alpha Commodity Arbitrage had a return of 9% due to active management (alpha). Salus Alpha Commodity Arbitrage tracks the CAX - Commodity Arbitrage Index.

The CAX Index covers the performance of arbitrage strategies, which aim to extract consistent market neutral returns from valuation inefficiencies arising among related commodities - like for example Brent Crude vs. WTI Light Sweet Crude - or among different maturities of futures contracts on one commodity due to Contango, Backwardation and Seasonality. Contango denotes a market situation where longer-dated commodity futures are priced higher than shorter-dated commodity futures. Markets in contango are characterized by low demand relative to available supply. In these markets, investors holding a long position suffer a roll loss when selling expiring contracts at low prices, and buying new contracts as higher prices. The CAX Index currently has a 4.85% spread position in Lean Hogs, which is currently 37.55% p.a. contangoed.   

The Salus Alpha Equity Hedged had a performance of +6.34% for the year to date until 8/31/2011, outperforming the S&P 500 Index by +9.42%. The 12 month rolling alpha of Salus Alpha Equity Hedged to the S&P500 is 6% p.a., the 12 month rolling beta is currently -0.1. This implies that in the past 12 months, the fund had a return of 6% due to active management (alpha). The Fund outperformed the HFRX Equity Hedge Index by 20.22%. The Salus Alpha Equity Hedged currently has a 14% exposure to Long Bias, 34% to Market Neutral, 22% to Long Short Variable Bias,  and 30% to Short Bias.  

The Salus Alpha Event Driven had a performance of +2.49% for the year to date until 8/31/2011, outperforming the S&P 500 Index by +5.57%. The fund's performance for the period was 5.41% higher than the performance of the HFRX Event Driven Index.  The SA FX Strategies had a performance of -0.67% for the month to date, outperforming the S&P 500 Index by +5.01%. The product outperformed the industry benchmark Barclay BTOP FX Index by 0.70%. The index had a return of -1.37%. The FX Managers in the SA FX Strategies Portfolio profited by the USD's weakness vs. Russian Rouble, Norwegian Krone, Canadian Dollar, Australian Dollar, Swedish Krone, British Pound, Swiss Franc, Singapore Dollar, Mexican Peso, Polish Zloty and Brazilian Real. The managers incurred losses due to the Dollar's strength vs. New Zealand Dollar, and due to the USD devaluation vs. Euro, Japanese Yen and Danish Krone.  

The Salus Alpha Directional Markets had a performance of -2.24% for the year to date until 8/31/2011, outperforming the S&P 500 Index by +0.84%.

The Salus Alpha Multi Style had a performance of -0.76% for the year to date until 8/31/2011, outperforming the S&P 500 Index by +2.32%. The fund's performance was 4.39% above the performance of HFRX Global Index for the period.  

The Salus Alpha RN Special Situations had a performance of -7.71% for the year to date until 8/31/2011.  

The Salus Alpha Managed Futures had a performance of -0.03% for the year to date until 8/31/2011, outperforming the S&P 500 Index by +3.05%. The fund's performance was 0.41% better than the performance of the HFRX Macro Index for the period.

NEWS - 10

Salus Alpha products outperform equity markets

Aug 15, 2011, 

In the current quarter, all Salus Alpha Funds  outperformed global equity markets in what has been a difficult environment. Salus Alpha Managed Futures led the way with a gain of 4.89% in the current quarter, while the US S&P 500 Index lost 2.15%, and the German DAX30 index declined 2.95% in the same period.

The 24 month rolling alpha of Salus Alpha Managed Futures compared to the S&P500 is 5% p.a, while the 24 month rolling beta is currently 0.2. This implies that in the past 24 months, the fund had a return of approximately 5% due to active management (alpha), and 0.40% return due to the positive market beta. The fund's performance was 4.50% better than the performance of the HFRX Macro Index for the period.

The CTAs, Global Macro and FX Managers in the Salus Alpha Managed Futures portfolio profited by continuing trends in Softs, Precious Metals, Industrial Metals, Financials, FX, Energy and Interest Rates.

The Salus Alpha Directional Markets had a performance of +4.64% for the month to date, outperforming the S&P 500 Index by 6.79%. The 12 month rolling alpha of Salus Alpha Directional Markets to the S&P500 is 4% p.a., the 12 month rolling beta is currently 0.2. The performance of Salus Alpha Directional Markets was 2.34% better than the performance of HFRX Systematic Diversified Index.

The Salus Alpha Multi Style had a performance of +3.92% for the month to date, outperforming the S&P 500 Index by 6.07%. The fund's performance was 4.05% above the performance of HFRX Global Index for the period.

The Salus Alpha Equity Hedged had a performance of 0.76% for the month to date, outperforming the S&P 500 Index by +2.91%. The 12 month rolling alpha of Salus Alpha Equity Hedged to the S&P500 is 8% p.a., the 12 month rolling beta is currently -0.2. The Salus Alpha Equity Hedged currently has a 40% exposure to Long Bias, 23% to Market Neutral, 7% to Long Short Variable Bias,  and 30% to Short Bias.

The Salus Alpha Event Driven had a performance of +0.74% for the month to date, outperforming the S&P 500 Index by 2.89%. The 12 month rolling alpha of Salus Alpha Event Driven to the S&P500 is 4% p.a., the 12 month rolling beta is currently -0.1. This implies that in the past 12 months, the fund had a return of 4% due to active management (alpha). The fund's performance for the period was 1.26% higher than the performance of the HFRX Event Driven Index.

The Salus Alpha RN Special Situations had a performance of +0.09% for the month to date, outperforming the S&P 500 Index by 2.24%. The fund's performance for the period was 0.61% higher than the performance of the HFRX Event Driven Index.

The Salus Alpha Real Estate had a performance of -0.02% for the month to date, outperforming the EPRA / NAREIT Index by +1.97%. Salus Alpha Real Estate is a single manager single strategy fund, which invests according to Salus Alpha’s proprietary Global Real Estate Model. The Salus Alpha Real Estate outperformed the EPRA/NAREIT Real Estate Index by 1.97% during the month of July. The current volatility in the Real Estate markets is above the model’s risk threshold. The fund therefore has no allocation to equities and is invested exclusively in risk neutral assets.

The Salus Alpha Commodity Arbitrage had a performance of +8.71% for the year to date until 7/29/2011, outperforming the S&P 500 Index by 5.96%. The fund outperformed the S&P GSCI Index by 0.12%, which booked a gain of 8.59% in the reporting period. The 12 month rolling alpha of Salus Alpha Commodity Arbitrage to the S&P500 is 8% p.a., the 12 month rolling beta is currently 0.0. This implies that in the past 12 months, the Salus Alpha Commodity Arbitrage had a return of approximately 8% due to active management (alpha), and 0.01% return due to the positive market beta. The performance of Salus Alpha Commodity Arbitrage was 12.70% better than the performance of HFRX Systematic Diversified Index.

Salus Alpha Commodity Arbitrage tracks the CAX - Commodity Arbitrage Index. The CAX Index covers the performance of arbitrage strategies, which aim to extract consistent market neutral returns from valuation inefficiencies arising among related commodities - like for example Brent Crude vs. WTI Light Sweet Crude - or among different maturities of futures contracts on one commodity due to Contango, Backwardation and Seasonality.

The SA FX Strategies had a performance of -0.67% for the month to date, outperforming the S&P 500 Index by +1.48%. The FX Managers in the SA FX Strategies Portfolio profited by the USD's weakness vs. Russian Rouble, Norwegian Krone, Canadian Dollar, Australian Dollar, Swedish Krone, British Pound, Swiss Franc, Singapore Dollar, Mexican Peso, Polish Zloty and Brazilian Real. The managers incurred losses due to the Dollar's strength vs. New Zealand Dollar, and due to the USD devaluation vs. Euro, Japanese Yen and Danish Krone.

NEWS - 9

Hedge Funds Review – Video: interview with Günther Schneider, hedge fund specialist, Salus Alpha

Salus Alpha, with $1.1 billion under management, believes investors want regulated products and has been offering its hedge funds and funds of hedge funds as onshore products since 2001.

From inception Salus Alpha was keen to offer investors transparency and liquidity, according to Günther Schneider, head of global business development and a hedge fund specialist at Salus Alpha Financial Service (Europe). He is proud of the fact that Salus Alpha, now with over $1.1 billion of assets under management in a variety of vehicles, was one of the first managers to offer daily liquid Ucits funds in all its hedge fund strategies.

“Ucits has become such a strong story recently,” said Schneider, but he believes investors need to approach alternative products by looking at the strategy as well as the asset managers’ capabilities to deliver performance. “Sometimes people talk too much about the vehicle and do not concentrate on the asset strategy under management,” he noted.

When asked if daily liquidity is more of a marketing ploy, Schneider is adamant that liquidity is “becoming more important” for investors. “If you look at markets and market conditions, people like the idea of having liquid portfolios. We’ve been offering daily liquid alternative investments since 2003 so we’ve been used to structuring products like that and offering it to investors. Yes, they like it. As soon as they see it is possible, they take advantage of [daily liquidity],” he stated.

In a wide-ranging interview, Schneider explained how he could offer an event driven strategy in a Ucits format as well as offering advice to other managers on the benefits of having an extensive network of offices close to investors. He said it was important to have a “presence on the ground”, particularly in the Asian markets. Salus Alpha has offices in Singapore and Hong Kong.

On the question of regulation, Schneider admitted new laws will “have an impact on all asset managers but hedge funds/alternative managers are more in the focus [as far as regulators are concerned] than others”. This, he said, was a good thing as he believes some of the issues being pushed by regulators, like transparency and liquidity, will be good for investors and the market in general. He advocated co-operation with lawmakers and active engagement, rather than sitting on the sidelines as politicians draw up new rules.

Schneider also talked about the attractions of managed futures for investors. He thinks investors will become more discriminating of which CTA/managed future fund managers they choose in future as those who do well in less favourable markets continue to offer strong performance compared with others.