AC Risk Parity 12 Fund: Alceda Fund Management (member of Aquila Capital Group)

11th European Performance Awards 2011

The European Perfomance Awards 2011

Launched in 2008 the AC Risk Parity Fund was one of the first absolute return open-end Ucits III-compliant funds to become available in the market, offering daily pricing and liquidity. Launched in Ucits form as a response to investor demand for transparency, regulatory oversight and liquidity, the fund uses a proven multi-asset investment strategy.

Risk-parity strategies are fairly rare, with less than 10 companies managing them worldwide. Of these the majority are completely passive strategies.

The edge of AC Risk Parity 12 Fund is in the alpha-producing tactical asset allocation model, according to the portfolio manager. Allocations to all liquid, non-correlated asset classes that offer a risk premium such as bonds, equities and commodities are optimised.

In order to ensure the portfolio is efficiently diversified, contributions to the asset classes are risk-weighted to approximately equal risk proportions across each asset class. The key feature of this risk-weighted combination of liquid and uncorrelated asset classes is that it significantly improves the Sharpe ratio.

The fund uses the Fund Creator risk management system based on research conducted by Harry Kat and Helder Palaro at the Cass Business School in London. The system is unique in its capability to control tightly a large variety of risk parameters; correlation to equities, kurtosis and skewness.

The fund uses Fund Creator on a daily basis to track these key risk parameters closely and to optimise the portfolio exposure actively, ensuring a stable and predictable risk profile over time.

The fund’s investment strategy aims to provide return stability and can generate performance even in times of significant market downturns. It aims to appeal to investors seeking good diversification.

The fund’s performance during the crisis in 2008 was positive, achieving an annual return of 11.35%. This compares favourably with average losses of 42.40% incurred by European equities (Euro Stoxx 50) and a negative 19.79% posted by other absolute return strategies (HFRI Index).

This strategy was first implemented in an offshore fund in 2004. In 2008 it launched as a Ucits fund. The strategy has annualised returns of 11.67% since inception.

The fund has grown substantially since its launch and now has assets under management of over $1.4 billion in the Aquila Risk Parity strategies. The fund is one of the few Ucits strategies to have over $1 billion AUM.

Aquila Capital specialises in alternative and non-conventional investments. It is an independent, shareholder-managed investment boutique managing client assets and developing custom investment solutions.

Fund facts
Full name of fund: AC Risk Parity 12 Fund
Name of portfolio manager: Harold Heuschmidt and Aquila Capital's quant team
Name of investment/management company: Alceda Fund Management, Luxembourg, a member of Aquila Capital Group
Contact information: Roland Schulz, Aquila Capital, Ferdinandstr. 25-27, 20095 Hamburg, Germany (+49 40 411 619 100; [email protected];
Launch date: September 9, 2008
Assets under management: $413 million (fund); $1.4 billion (strategy) (at April 30, 2011)
Net cumulative performance since inception: 36.83 % since inception of the Ucits fund, 112.66% since inception of the strategy
Annualised return: 11.67%
Annualised volatility: 8.85%
Sharpe ratio: 0.98 (3%)
Strategy: equity market neutral
Share classes: class A institutional, class B retail; euro, Swiss franc, US dollar and sterling currency classes available
Administrator: HSBC Trinkaus Investment Managers
Auditor: PricewaterhouseCoopers
Custodian: HSBC Trinkaus & Burkhardt (International)
Custodian: HSBC Trinkaus & Burkhardt (custodian and clearing broker)
Legal counsel: Dechert
Domicile: Luxembourg
Management fee: 1.6% p.a.
Performance fee: 15% p.a.
Minimum investment:  €50,000 (class EUR A); €1,000 (class EUR B)
Lock-in: none
Redemption/liquidity terms: daily

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