NEWS - 11

Video (sponsored forum): Ucits structures remain attractive to hedge funds

30 Aug 2011

Alceda Fund Management, Bank of America Merrill Lynch, KB Associates and fund management company Salus Alpha Capital debate some of the reasons hedge funds are interested in Ucits vehicles.

Michael Sanders, CEO of Alceda Fund Management, Eric Personne, head of fund solutions group at Bank of America Merrill Lynch, and Claire Cawley, executive director at KB Associates, together with Günther Schneider, hedge fund specialist with Salus Alpha Capital, discuss the attractions of Ucits structures for hedge funds as well as some of the negative aspects.

For Sanders there are two reasons why a hedge fund manager should be interested in Ucits vehicles. He cited institutional investor preference for more regulated, liquid and transparent structures as well as easier distribution of the fund, not only in the European Union but around the globe.

"There is a huge appetite for launching Ucits funds," agreed Cawley, "and it's driven by investor demand." After the 2008 crisis investors are looking for products offering a regulated solution and solutions that "look like a safe house". "I think you also find a lot of US managers are looking towards Ucits for the purpose of gaining access to a large number of markets," she concluded.

Personne thinks US managers are now aware of Ucits whereas a couple of years ago they were not interested. "If you believe what you deliver is real added value, and alternative investment claims it is added value and I do believe it is, there is no reason why this product shouldn't reach the largest possible audience," he declared.

Hedge fund specialist Schneider confirmed Salus Alpha Capital was one of the first hedge funds to move into Ucits. "The reasons: it's a standardised package, it's safe assets and finally you have a very defined liquidity - and that's always been missing in the offshore world."

View the full filmed discussion

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.

NEWS - 8

Austrian roundtable celebrates extended relationship with alternatives

By Beverly Chandler, Opalesque London, Monday, July 25, 2011

The Opalesque Austria Roundtable, sponsored by Salus Alpha Group and the Opalesque Roundtable Series Sponsor Custom House Group, and held in Vienna at the end of June, opened with a discussion on how lengthy is the country’s history in alternatives.

The panel consisted of Mark Cachia, Head of Alternative Investments, Erste Group; Martin Greil, Co-founder and Secretary General of the Alternative Investment Association VAI; Günther Herndlhofer, Investment Manager, VBV Pension Fund; Oliver Prock, CEO and CIO, Salus Alpha Capital; Marie Milford, Managing Partner & CEO, Asset Allocation Alpha and Günther Kastner, Managing Partner, Absolute Portfolio Management.

Prock opened the discussion pointing out that Austria has a considerable history in alternatives and is often seen from abroad to have a strong leaning towards CTAs and quantitative strategies. However, he said: "Over the more recent years, the industry here has grown and matured, and many different strategies are run out of Austria as of today. Of course, back then the barriers of entry in managed futures were not as high as we find them nowadays. In the early days it was possible in Austria to establish different onshore structures for alternatives. That was quite favorable for the development of a small niche industry here."

Growth in alternatives in Austria also came from institutional investors. "It is also important to notice that the Austrian institutional investors also favored the development of alternatives, which was due to their innovative asset allocation and a focus on performance and diversification. We do a lot of business in Germany, and just as a comparison, their institutions only recently started to include a 5% alternatives basket. The Austrian investors were a little bit ahead of that because they believed in it. People like Maria, at her previous work at PSK, or myself at Erste Bank at that time all had an alternatives allocation. However, the bad thing was that even though all of this favored the development of a local industry, foreign funds definitely got a bigger chunk of the money than the local funds."

Milford agrees, looking back to the mid 1980s to see the roots of the Austrian alternatives industry. "In order to understand where we are today, let me go even a bit further back in time to the mid 1980s when the whole banking industry went through profound changes" she said. "At that time the - let's call them - "old boys" were retiring, and a new breed of CEOs and Boards of Directors emerged, who were instrumental in using and even creating some of the instruments which were new then and are today standard tools and investments. I remember for instance, when I started in the Economics Department, one day I saw my boss drawing squares and arrows, and I asked him: "Walter, what are you doing here?" and he said, "Maria, look, that is very interesting. It is called Swap! You have here a bucket of money and there a bucket, and then you just exchange the interest payments!" And soon after that, he actually traded one of the first swaps in Austria."

Milford remembers stepping into what she calls frontier territory with investing part of the bank’s book into futures. "There were no screens or direct access, we had to send faxes of our orders to JP Morgan in the U.S., and the next day we received the confirmation from them. Maybe this is a feature of Austrian corporate culture. If we had good ideas, we could actually realize them."

Milford was asked by the Board of Directors of her bank to set up a portfolio with each and every risk except fixed income. "They actually expected me to start an equity portfolio. I said that it was not wise to start an equity portfolio at that time. I suggested a move into hedge funds instead, and the two people in charge on the Board thought for some time and came back to me and approved it. You have to be aware that this happened at a time when CalPERS for example didn't even consider investing into hedge funds."

Being ahead of the game, at least in continental Europe, meant that Milford always liked the hedge fund industry for its role as a boutique and niche industry. "Things changed when in 2002/2003 the whole alternatives industry moved out of niche into mainstream, which in the end has become less and less entrepreneurial, in my view. After 2008, things got even worse, and to a certain extent some investors may even be reluctant to invest what should be their alternatives diversification into another mainstream world or mass market" she said.

She believes that the hedge fund industry is split up into two parts. "On one side you have the large mega hedge funds that are preferred by the institutional investor market. I think they are very useful, they are a good thing to invest into, but because they are so large they operate by certain rule: you have to look at yearend figures, and your terms regarding liquidity and transparency have to correspond to what your institutional investor base expects."

"And on the other side there is still a very small market out there that are very interesting, you find still some of the let's call it "old style", or the "old hedge fund boys" who really arbitrage this mainstream market. Because they are free, they do not have to look at year-end and so on, they can be much more niche and opportunistic" Milford says.

"Don't get me wrong, the institutionalized market is a good development and we need investments there. But at the same time, they are not the same as what we have seen 15 years ago or more; these firms are different."

NEWS - 7

Salus Alpha Commodity Arbitrage returned 1.78% for June

11/07/2011

As of 06/30/2011 the Salus Alpha Commodity Arbitrage VT heads the list of Salus Alpha Funds with 1.78% MTD-Return. The fund returned +1.78% in June to date and excellent +8.99% since the beginning of the year 2011.

The fund outperformed the Dow Jones UBS Commodity Index by 6.83% during the reporting period, which  lost -5.05%, and it outperformed the S&P GSCI Index by 7.21%, which booked a loss of -5.43% 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 -0.1. This implies that in the past 12 months, the Salus Alpha Commodity Arbitrage had a return of 9% due to active management (alpha). The performance of Salus Alpha Commodity Arbitrage was 4.13% 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.

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 10.00% spread position in Wheat, which is currently 31.28% p.a. contangoed.

The Salus Alpha Real Estate had a performance of +0.20% for the month to date, outperforming the EPRA / NAREIT Index by +2.58%. 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 2.58% and the GPR 250 Europe Index by 3.15% during the month of June.

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.

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 +13.42% in this timespan.

The Salus Alpha Event Driven had a performance of +2.18% for the year to date until 6/30/2011. 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 0.66% higher than the performance of the HFRX Event Driven Index.

The Salus Alpha Equity Hedged had a performance of +5.70% for the year to date until 6/30/2011, outperforming the S&P 500 Index by +0.69%. The 12 month rolling alpha of Salus Alpha Equity Hedged to the S&P500 is 9% 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 9% due to active management (alpha). The Fund outperformed the HFRX Equity Hedge Index by 14.48%.

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 SA FX Strategies had a performance of -1.34% for the month to date, outperforming the S&P 500 Index by +0.49%. The performance of SA FX Strategies was 1.01% better than the performance of HFRX Macro Index.

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 Multi Style had a performance of +2.26% for the year to date until 6/30/2011. The fund's performance was 4.35% above the performance of HFRX Global Index for the period.

The Salus Alpha Managed Futures had a performance of +4.24% for the year to date until 6/30/2011. The fund's performance was 6.35% 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.

The Salus Alpha RN Special Situations had a performance of +0.09% for the year to date until 6/30/2011.

The Salus Alpha Directional Markets had a performance of -2.60% for the month to date.