Best Long/Short Equity Hedge Fund: Shortlisted

Manticore is a global long/short equity fund with a focus on investing in equities in the technology, media and telecom (TMT) sectors.

The investment team consists of six portfolio managers/analysts: Magnus Angenfelt (founder), Nalini Bonnier, David Meyer, David Rindegren, Johan Söderström and Seth Wunder. Collectively they who have 70 years of combined industry experience.

The TMT sectors are characterised by substantial differences in valuations and high volatility, which provides for "vast investment opportunities" but also dedicated resources and an eye for those opportunities," say the managers.

TM are dynamic sectors with rapid universal introductions of ne and business concepts. This makes them demanding to analyse from a business and technology perspective. Manticor Capial says few teams have he kind of coverage offred by its team. As an example, it points to the fact that it expert on gaming companies recently attended a Chinese computer game conference where he was the only representative from outside Asia."

The managers aim to achieve a gross exposure of around 250% and to deliver annual returns of 10%-20% through an emphasis on stock picking rather than market direction. The fund returned 27% after fees in 2009 against its benchmark, the HFRX Global Hedge Fund Index which achieved 13.4%.

The Manticore fund is based on fundamental equity analysis. The portfolio managers use two main strategies. Themes and trends investments account for approximately 50% of the fund's position choices. The managers try to identify universal evolutionary trends that may have deeper impact (positive or negative) on groups of companies.

The second main strategy employed is stock specific relative value, implemented through fundamental pairs and hedged sub-portfolios.

In addition to more traditional fundamental research, Manticore has developed proprietary systems and valuation approaches to filter sub-sectors to create efficiently hedged sub-portfolios.

Over time the managers say the two investment strategies have made equal contributions to performance of the fund. An example of a successful valuation-based investment is the fund's significant long position in Chinese online game company Perfect World. According to the fund managers this company was poorly analysed and mispriced by the market.

It illustrates their strong conviction the TMT sector is an excellent area in which to find mispriced shares offering a good potential absolute return. By maintaining their high gross exposure, they say they hope to be able to continue to generate absolute returns at the top end of their target interval.

The integration of telecom, media technology, say he managers, is an opportunity. At the same time the competition from both sell side and buy side has decline in TMT.

For  relative value investments there is a constant inflow through a screening process and models. The managers see no signs of a deterioration of the current favourable conditions.

The inflow of new theme investments is more sporadic but such investments have a longer life. Certain themes have existed for several years and continue to perform in the portfolio. The challenge lies in getting the timing right.

Over the first quarter of 2010, the managers have taken relatively large positions in hardware and retailers. The largest positions in hardware are Dell, Sony and Apple.

The managers say they have had a love-hate with Apple for many years and characterise it as "good company, expensive share". With  the latest moves into tablet computers and the iPhone, the managers say it is easier to expect a return on the share.

The investment team says it benefits from being located in Scandinavia, one of the more dynamic TMT regions in the world. Manticore also has a research office in New York.

Fund facts: Manticore

Full name of fund: Manticore
Name of manager: Manticore Capital
Contact: Institutional Client Group, Norrmalmstorg 14 Stockholm SE-103 86, Sweden (+46 8 407 1300: IR@brummer.se)
Launch date: 2001
Strategy: long/short equity
Portfolio size: $181 million
Average annualised return: 6.21% (at March 31, 2010)
Average annualised volatility: 7.69% (at March 31, 2010)
Sharpe ratio: 0.45
Administrator: B&P Fund Services
Auditor: KPMG
Custodian: SEB
Domicile: Sweden
Management fee: 1%
Performance fee: 20% with a high watermark
Minimum investment: SEK 500,000
Lock-in/up: none
Redemption period: monthly