Best Fixed Income Hedge Fund: Shortlisted

CQS is a global diversified asset management group with family of hedge funds with interests in credit and long only funds.

Launched in 2006, the CQS Asset Backed Securities Feeder Fund aims to identify cheap ways of hedging investments in asset backed securities (ABS), including the use of equity and credit instruments of issuers impacted by ABS markets.

It has the ability to take long/short and relative value positions in asset backed securities, retail mortgage backed securities, commercial mortgage backed securities and related instruments.

The  managers, Michael Hintze and Alistair Lumsden, operate a bottom-up security selection process designed to identify arbitrage opportunities with attractive risk and reward characteristics. In addition the fund uses quantitative portfolio construction combined with a detailed review of issuer documentation to reduce volatility and mitigate risk.

The combination of a professional and highly experienced portfolio management team and the focus on analysis of underlying collateral backed by the quality of supporting operational and risk management platform that CQS believes gives the fund an edge.

Hintze and Lumsden say their overall outlook for the market is that "fundamentally, things are slowly looking somewhat better", with strong technical factors providing support to that ongoing trend.

They continue to see assets on the long side that we believe offer stable returns even with deteriorating assumptions and which, therefore, offer good potential upside to a stable or improving market.

Recently the fund reduced some of its short exposure as the support and performance of various assets held in the portfolio improved and the managers are positive on the rest of the year ahead, believing the fund is well positioned to benefit from numerous economic and market developments.

Founded in 1999 by Michael Hintze, who is both chief executive officer and senior investment officer, CQS has been built around investment professionals, including research specialists in fundamental and quantitative analysis, and investment specialists in equities, credit, fixed income, volatility and derivatives.

The research and investment teams collaborate in the running of client portfolios from trading rooms in London, New York and Hong Kong. Supporting the investment management process, CQS has a robust asset management infrastructure platform with experienced professionals working in, among other areas, liability and margin management, risk management, operations, investor relations, legal, compliance, finance and information technology.

The senior executives meet regularly as an executive committee which is supported by the CQS global advisory forum, consisting of  experienced professionals from a broad spectrum of backgrounds such as business, academia and regulation. This group also meets on a regular basis to review the firms business and strategy.

Fund facts: CQS Asset Backed Securities Feeder Fund

Name of manager: CQS
Full name of fund: CQS Asset Backed Securities Feeder Fund
Contact: Michael Rummel, 33 Grosvenor Place, London SW1X 7HY (+44  (0)20 7201 6900; michael.rummel@cqsm.com)
Launch date: 2006
Strategy: fixed income
Portfolio size: $505 million
Average annualised return: 42.17% (at March 31, 2010)
Average annualised volatility: 15.62% (at March 31, 2010)
Sharpe ratio: 2.38
Share classes: sterling and euro
Administrator: Citco Fund Services
Auditor: Ernst & Young
Custodian/Prime broker: multiple
Management fee: 2%
Performance fee: 20%
Minimum investment: $1 million
Redemption period: quarterly with 90 days' notice