Highly commended: Best performing diversified fund of hedge funds over three years

HDF Finance has a wealth of experience in the industry. Founded in 1986, it was the first independent French multi-manager in the alternative sector and has been investing in long/short strategies for over two decades.

HDF Multi Reactive Class fund was launched in October 2004. It is a broadly diversified multi-strategy fund of hedge funds (FoHF) allocating to managers trading all financial assets.

“This is a multi-strategy fund which is less diversified than many,” explains chief investment officer (CIO) Christophe Jaubert. “The common denominator in the portfolio is that it focuses on very reactive managers, those with the capacity to take profits or cut losses very quickly with a short-term investment horizon, managers who understand flow, market momentum and market dynamics.”

Macro views are not the driving force behind selection, as is the case with many diversified portfolios. “That differentiates the fund from most multi strategy funds,” says Jaubert. “In this fund we don’t really look at fundamental managers who look at the difference between value and price on a longer term horizon.”

He continues: “In 2008 many people had to free up cash at any cost in order to deleverage. As a result, market prices were no longer in line with intrinsic value, and fundamental managers suffered. However, our reactive managers could cope with this kind of hectic backdrop. The result is that our fund has been positive every calendar year, even in 2008.”

The fund has produced an annualised return of 4.7% over the past five years with volatility of 2.3% over the same period.

The fund shuns leverage apart from a 10% overdraft facility in order to match the temporary liquidity gaps between investments and redemptions on the asset and liability sides.

The company is continuing to build its research team to ensure it has the ability to identify new strategies and managers at an early stage. Jaubert and fellow manager Thierry de Rycke are part of a 14-strong team at HDF Finance. The team also benefits from a long-standing collaboration with renowned French economist Christian de Boissieu.

HDF’s competitive edge comes, it says, from the strategy and style allocation process it follows. A “no compromise” approach to due diligence has helped it avoid frauds and fund blow-ups. No matter how many green flags a potential manager is waving, a single red flag will mean no investment from an HDF manager, according to Jaubert.

HDF is also careful to make sure the FoHF’s liquidity terms matches the terms given by the underlying managers, avoiding liquidity mismatches. This attention to liquidity helped the fund keep pace with redemption requests throughout the financial crisis without having to impose gates or put less liquid assets into side pockets.

Fund facts

Full name of fund: HDF Multi Reactive
Fund managers: Christophe Jaubert and Thierry de Rycke
Name of investment/management company: HDF Finance
Contact: Christophe Chouard, managing director (+33 1 44 17 12 65; cchouard@hdf-finance.fr)
Launch date: October 1, 2004
Assets under management: €200 million
Annualised return: 4.7% 
Annualised volatility: 2.3%
Strategy: multi-strategy
Share classes: euro, US dollars, sterling, Swiss franc
Administrator: RBC Dexia Investor Services, CACEIS
Auditor: PricewaterhouseCoopers
Custodian: RBC Dexia Investor Services
Domicile: France
Management fee: 1.8%
Performance fee: 10% above Eonia
Minimum investment: €10,000
Lock-in/up: none
Redemption period: monthly with 30 business days’ notice