Highly commended: Best performing emerging markets fund of hedge funds

Launched in 2005 the Signet Emerging Opportunities Fund focuses on opportunities in emerging and converging markets with a bias towards fixed income investments.

Although changes in global liquidity and other macro economic factors determine the scope and scale of capital in and outflow to and from emerging markets, local political and economic factors also create risk and return opportunities. The fund is directionally agnostic and pursues both long e and short opportunities.

“Ten years ago an investment in the emerging markets was an investment in long/short equity. As the emerging markets have matured and grown, emerging market currencies have free floated, yield curves lengthened and deepened, sovereign credit exposure tools matured and corporate credit provision became more available both longer term and farther down the credit curve. Today's opportunity set is expressed through all these instruments,” says joint chief investment officer (CIO) Bob Marquardt.

The geographic focus is on investments in South East Asia, Brazil, Russia, India and China as well as peripheral Europe. The fund uses a multi-strategy approach in fixed income of macro and credit in addition to some equity exposure.

Currently Signet views the growth potential of the converging markets and the quicker recovery of under-levered economies as the key drivers. Asian currencies that once shadowed the US dollar are now outperforming.

Signet attributes much of its success to the experience of its team. Founder, chairman and co-head of investment management Robert Marquardt leads Signet Group's top-down process of identifying investment opportunities while focusing on the most pertinent investment risks. He is also intimately involved in hedge fund due diligence. Marquardt has two decades of experience with alternative investments.

CEO and co-head of investment management Serge Umansky joined Signet in 1999. His oversight of the group's research and development efforts has resulted in what the company believes is a cutting-edge proprietary risk management system targeting specific risk characteristics of hedge fund portfolios.

Thomas Canning is director of Signet's US operations and is also a portfolio manager. Canning, with two decades of experience with alternative investments, joined Signet in 2000. The final member of the management team is André Jaun who is also head of risk management. He joined the group in 2007.

Manager selection is a three-step procedure involving identification, evaluation and selection. Throughout the process Signet’s analysis focuses on four areas relevant to the hedge fund manager: people, investment strategy and risk, fund-specific criteria and business and operational risks.

The fund aims to generate returns equivalent to or in excess of Libor plus 4%-10% with relatively low volatility and limited correlation to market movements affecting traditional asset classes.

While leverage is permitted, it is limited to 20% on a temporary basis and used principally for liquidity purposes. Under normal circumstances it is a fraction of this level.

Risk management is a big focus for the fund. Jaun’s team has veto power over any existing or potential investments. The team has developed its own in-house risk management software system, SigMetrix, a proprietary web based system for fund of hedge funds. It integrates portfolio (trading, risk management), analysis (exposures) and middle-office functions (currency hedging, reconciliation) for master-feeder funds.

The fund, with assets under management of $106 million, has generated annualised returns of 6.0% with volatility of 6.4%.

Fund facts

Full name of fund: Signet Emerging Opportunities Fund
Name of portfolio managers: Robert Mardquardt, Serge Umansky, Thomas Canning and André Jaun
Name of investment/management company: Signet Capital Management
Contact: Tim Gardner (tgardner@signetmanagement.com)
Launch date: July 2005
Assets under management: $106 million
Annualised return: 6.00%
Annualised volatility: 6.40%
Strategy: multi-strategy with a fixed income bias
Share classes: US dollar and euro
Administrator: BDO Simpson Xavier, Dublin
Auditor: KPMG, Dublin
Custodian: HSBC Institutional Trust Services, Dublin
Domicile: British Virgin Islands
Listing: Irish Stock Exchange
Management fee: 1.5%
Performance fee: 5%
Minimum investment: €250,000
Lock-in/up: none
Redemption period: quarterly with 90 days’ notice