Highly commended: Best performing diversified fund of hedge funds over one year

In the short time since it was launched in July 2009, Sicav Arbitrage Opportunities has produced strong results, generating annualised returns of 20.6% with a standard deviation of just 5.33%, including 10 consecutive months of positive returns from inception.

That is something fund manager Margrethe Rokkum Testi is proud of, though she credits the performance to the work of a strong investment team with a disciplined approach, not one single individual.

“Thalia’s investment team is composed of 12 professionals with several years of experience in hedge fund investing and markets,” explains Rokkum Testi, also chief investment officer (CIO) and a co-founder of the asset management company.

“Thalia’s investment team has been solid and cohesive over time. We therefore have experienced a very limited turnover with only two analysts leaving since the company was founded in 2003,” she adds.

The fund uses a combination of classic bottom-up manager selection and portfolio construction to select and apportion investments. The fund seeks to generate a stable return, uncorrelated to financial markets, by investing in a range of arbitrage strategies using several managers to create a well-diversified portfolio.

It typically allocates to around 30 single manager funds with allocations to convertible arbitrage, credit, equity relative value and risk arbitrage strategies currently making up around 73.8% of the portfolio. It also looks at other strategies taking advantage of market discrepancies such as multi arbitrage, statistical arbitrage and volatility arbitrage.

“Our strength derives from our experience and most importantly from being able to access long-term relationships with leading houses that enables Thalia to profit from their talents,” says Rokkum Testi.

“Having access to their information flow gives Thalia a better understanding of global drivers, market opportunities and risks. Our approach is then to combine a balanced blend of the best established multi-arbitrage firms with successful single strategy hedge funds to enhance and complement the portfolio while giving Thalia the ability to better control the overall strategy exposure,” notes Testi.

Liquidity is quarterly with 34 days’ notice. That is achieved by carefully matching the liquidity on offer to Thalia clients with that available in underlying funds. This focus on liquidity matching avoids problems in the event of unexpected or large redemptions.

Risk management has always been an integral part of Thalia’s investment process, not just leading up to manager selection but also in monitoring existing investments. The team ensures all portfolios are managed according to their guidelines. It also monitors risk levels on a regular basis.

Monthly risk reports are produced. These focus on a manager's risk contribution to the fund as well as value at risk (VaR), value at specific risk (VaSR), value at market risk (VaMR), deviation metrics and return contribution.

Since opening the fund has attracted $226 million of investments from clients. Around half of investors are high net worth individuals and private bank clients with institutional investors making up the other half. Thalia’s assets under management (AUM) total $1.9 billion.

The fund charges a 1.6% management fee, a subscription fee up to 5% and an exit fee of up to 3%. The fund has no specific benchmark index but the Edhec Relative Value index is considered as an indicator of overall industry performance in the relative value area. In addition performance and risk are compared to MSCI World equity and WGBI indices over a three- to five-year period.

Fund facts

Full name of fund: Generali Hedge Fund Sicav Arbitrage Opportunities
Name of investment/management company: Thalia
Portfolio manager: Margrethe Rokkum Testi
Contact: Thalia, Via Peri 21, Lugano, Switzerland (+41 (0)91 912 9713; www.thaliainvest.com)
Launch date: July 2009
Assets under management: $227.62 million (July 2010)
Annualised return: 20.6%
Annualised volatility: 5.33%
Strategy: relative value/arbitrage
Share classes: US dollar (class A) and euro (class B)
Administrator: UBS Fund Services (Luxembourg)
Auditor: Ernst & Young
Domicile: Luxembourg
Management fee: 1.6%
Performance fee: not given
Minimum investment: $10,000
Lock-in/up: xxxxxx
Redemption period: quarterly with 34 days’ notice