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The Cheyne Convertibles Absolute Return Fund aims to generate long-term absolute capital appreciation by investing in global convertible bonds. The fund uses effective hedge overlays to generate absolute returns targeted to be net cash plus 8%-10% return a year with 6%-8% volatility.

While the fund strategy uses selective unhedged convertibles offering attractive risk-reward profiles, the fund can also hedge equity and credit. In the hedged portion of the portfolio, the fund managers seek to construct positions that are seen as ‘self funding’ where convertible income more than compensates for hedging costs. This has the effect of creating a portfolio containing attractive optionality.

The portfolio has a consistent weighting to each strategy. These allocations are opportunistically rebalanced periodically. This dynamic approach also means return drivers will vary according to market conditions. For example directionality drives returns in a rising market while in more volatile markets returns are driven more by the hedged portion of the fund.

The investment process is built around identifying undervalued convertible bonds from a credit and/or equity perspective. The fund managers also target balanced names in attractive market segments via thorough top-down and bottom-up fundamental analysis of the underlying name.

In addition to the team’s own considerable experience of credit and equity markets, the managers can draw on a further 20 analysts throughout Cheyne, including a seasoned corporate credit research team with over 85 years of combined experience.

Cheyne’s portfolio management team has 17 years of investment experience and a 13-year track record in absolute return convertible bond investing. With a 10-year unbroken track record in the management of long-only and hedge fund convertible bond strategies, Akin Akinloye heads the Cheyne Convertibles Absolute Return Fund management team.

Akinloye has been with Cheyne since its inception in 2000. Annelie Fearon joined the team as senior convertible bond analyst in 2003.

The team also draws on the resources of the wider equity and credit research teams within Cheyne, one of the top European alternative investment managers by assets under management.

The investment management company is based in London and has 47 investment professionals.

Fund facts
Full name of fund: Cheyne Convertibles Absolute Return Fund
Name of portfolio manager: Akin Akinloye
Name of investment/management company: Cheyne Capital Management (UK)
Contact information: Yanti Falangola, Cheyne Capital Management, 13 Cleveland Row, London, SW1A 1DH (+44 (0)20 7968 7305; yanti.falangola@cheynecapital.com)
Launch date: December 2009
Net cumulative performance since inception: 17.99% (at April 30, 2011)
Annualised return: +12.4% (at April 30, 2011)
Annualised volatility: 5.67% (at April 30, 2011)
Sharpe ratio: 2.0 (at April 30, 2011)
Strategy: global convertibles
Share classes: US dollar, euro, sterling
Administrator: JP Morgan Administration Services (Ireland)
Auditor: KPMG (Dublin)
Custodian: JP Morgan Bank (Ireland)
Prime broker:  JP Morgan and Morgan Stanley
Legal counsel: Mason Hayes+Curran (Irish law) and Dechert (UK and US law)
Domicile: Ireland
Management fee: 0.75%
Performance fee: 10% over Libor
Minimum investment: €/$/£100,000
Lock-in: none
Redemption/liquidity terms: weekly liquidity with three days’ notice