Cape Town-based X-Chequer Fund Management has had a strong start with its latest South African equity hedge fund, the X-Chequer Flexible Long/Short Fund, which has gained a net 16.68% since inception last September. This compares with a gain of 9.79% in the JSE All Share Index over the period and 5.6% from the All Bond Index.
This is the fifth fund in the X-Chequer range, which includes market-neutral, long/short equity and quantitative based strategies.
The fund is lead managed by Walker Naude, assisted by X-Chequer’s founder and chief strategist Werner Prinsloo. The investment process is supported by top-down macro views and bottom-up fundamental company research from X-Chequer’s investment team.
Naude joined the company in 2009 as fund manager from T-Capital where he was co-manager of both market-neutral and long/short equity funds. Prior to that, he was a top-rated quantitative analyst. He has a degree in Actuarial Science and is a CFA charterholder.
The Flexible Long/Short Fund aims to deliver strong real returns over the medium term, tending to be more directional than X-Chequer’s other funds with the ability to change its net equity exposure given certain market conditions.
It can better express strong views in single companies, with a limit of 20% per instrument, and can also invest in companies with smaller market capitalisations. As of the end of May, the portfolio comprised 35 long positions and 13 shorts.
Year to date to the end of May, the fund has added a net 7.87%. It has had just two negative months since inception, dipping 0.73% in May (in a particularly tough month, which saw the FTSE/JSE All Share Index fall by 3.59%), and 0.23% last September (as the index fell 3.6%).
Prinsloo says the fund will appeal to investors with a higher risk appetite and a focus on strong longer-term growth who are less concerned with month-to-month fluctuations. While short-term capital preservation is still important in this product, it is not as key as in other X-Chequer products.
“The fund’s flexibility and nimbleness will allow it to fully capitalise on any opportunity and market volatility,” he says. “The fund prefers either a steep trending market, or high volatility, to generate returns. The current market uncertainty and volatility is creating some good opportunities.”
The fund is currently at R62 million. X-Chequer will look to soft-close at R100 million, with current capacity estimated at R150 million to maintain nimbleness in the strategy.
“The key for us with this fund is to retain the flexibility to be able to maximise opportunities in all market conditions,” says Prinsloo. Copyright. HedgeNews Africa – June 2012.