Best Managed Futures Hedge Fund: Shortlisted

The Dexia house view is that equities will continue to rise in 2010 but will be subject to considerable dispersion and volatility. This means "current market conditions are much more in favour of long short strategies," says Ludovic Ferras, head of the alternative and structured investments specialists team at Dexia Asset Management.

He believes equities will end the year around 10% higher but there will be "volatility and dispersion not only in equities but in the credit market as well".

This will suit funds in teh Dexia stable such as the Dexia Systemat, an absolute performance fund that aims to exploit the trends of financial markets through taking long and short positions in the major asset classes - equity indexes, short term rates, long rates, foreign exchange and commodities. "The market context for these funds is quite favourable," says Ferras.

Where Dexia can offer an edge on other hedge funds looking to exploit these markets, Ferras adds, is in its history of employing these techniques. Dexia launched its first convertible arbitrage fund in 1996. Also, its funds are onshore domiciled and so onshore regulated.

Dexia has mainly institutional investors. This means the funds are developed to deliver reliable and consistent returns conservatively balanced against risk and liquidity. For example, all the funds have daily or weekly liquidity, Ferras points out.

Risk controls are significant with institutional investors. They are often more conservative in their needs and outlook. These investors are not looking to shoot the lights out but to achieve stability and consistency in their investments and their performance.

The funds have been developed to meet those needs. The Dexia Systemat, for example, finds its performance exclusively through derivatives traded on regulated markets.

The management process of the Dexia Systemat is based on the development of quantitative models that identify the buy or sell signals, from past performance statistics.

The investment strategy combines three types of statistical models with a low correlation between them and applied on different time horizons. These are: trend following models, that exploit the market directionality through the analysis of variables such as moving averages, momentum, points of inflection; contrarian models, used short term through proprietary technical indicators, which attempt to exploit the properties of mean reversion of certain markets; and pattern recognition models, based on a short-term statistical analysis of markets.

The signals generated by these three types of models are systematically integrated into the Dexia Systemat portfolio. To meet the objective of the fund in terms of volatility and to maintain portfolio diversification, the allocation models analyse daily market conditions and calculate the weight allocated to each position.

The management team of Steeve Brument, Roland Juhel and Johan Mauchand between them have extensive experience in the futures markets, software development and statistical analysis. They all emhasis controlling volatility and risk management in the portfolio.

The aim is for the fund to achieve absolute performance over the Eonia index, over a three year recommended investment horizon and in all market configurations while keeping target volatility controlled between 12% and 14%. The fund also aims to be weakly correlated to traditional asset classes.

Fund facts: Dexia Systemat

Full name of fund: Dexia Systemat
Name of portfolio manager: Steeve Brument, Roland Juhel , Johan Mauchand
Name of investment/management company: Dexia Asset Management
Contact information: 40 Rue Washington, Paris 75008, France (+33 1 53 93 40 00)
Launch date: 1997
Strategy: managed futures
Assets under management: €29.91 million (at April 30, 2010)
Net cumulative performance since inception: 103.97% (at March 31, 2010)
Annualised return: 5.66% (at March 31, 2010)
Annualised volatility: 11.84% (at March 31, 2010)
Sharpe ratio: 0.27
Share classes: C Class
Administrator: RBC Dexia Investor Services
Auditor: KPMG
Custodian: RBC Dexia Investor Services
Domicile: France
Management fee: 1.5%
Performance fee: 20%