Shortlist: Best long/short equity hedge fund; Best directional hedge fund over three years

This directional long/short fund with small and mid-cap focus distinguishes itself with its niche investment mandate that is primarily the German-speaking equities universe. This has allowed for the creation of an established network of relationships with target quoted companies.

The fund’s two managers conduct in the region of 350 company visits and meetings each year. These visits create about half of the research for the fund and the rest comes from proprietary valuation models and research plus an information flow from an established network of sell-side analysts and brokers.

The fund has been managed by small and mid-cap specialist Felix Meier since its inception in September 2007. He also manages the Credit Suisse Equity (Lux) small and mid cap fund in Germany.

Jan Berg, the deputy portfolio manager, covers non-German-speaking Europe and also manages the Credit Suisse (Lux) small and mid-cap Europe.

Two Swiss small-cap fund managers and five buy-side analysts support both. The team averages 13 years' experience a head and the average time spent with Credit Suisse is seven.

The fund has a fundamental approach with alpha generated from long and short single stock positions. Although the fund is constrained size-wise by its investment mandate, it has successfully attracted assets.

Assets under management have grown to €86.8 million ($122.5 million) at the end of January 2011. The fund has 62.8% of assets represented by an internal discretionary mandate by Credit Suisse Multi-Asset Class solutions (MACS).

Given the current investment scope and size of the market, the fund limits itself to a maximum capacity of €600 million, a figure that is expected to be reached by the end of 2011. In tandem with a steady increase in AUM, the net return generated since inception has reached 46.1%.

The fund is actively traded and the team expects an annual portfolio turnover of seven times.

The strategy is directional long/short with returns driven by specific stock selection as well as systematic market risk.

The fund targets a Sharpe ratio above one. The main focus is on high conviction ideas with the potential to generate significant alpha.

The aim of the fund is to give lower volatility, less correlation with equity markets and better risk-adjusted performance than a long-only fund.

Where a stock is thought to underperform the team will also short it. The short book holds typically 20 conviction ideas that are on average held for a year. Short futures positions are used for hedging and when shorting index futures the managers split the index’s components and buy back those stocks that the manager judges are best held in the long book.

Market exposure can fluctuate between minus 50% and plus 100 % but typically there is a long bias of plus 30%. Typically the equity exposure is long 85% and short 55%, giving a gross exposure of 140%.

In times of high volatility the fund reduces its gross exposure.

In futures the fund generally has a net exposure of 80% of the short book and reduces costs by selling index futures rather than a basket of shares.

Fund facts
Full name of fund: CS Small Cap Alpha Opportunities Fund
Name of portfolio manager: Felix Meier
Name of investment/management company: Credit Suisse Asset Management
Contact information: Brigitte Hefti (head of investor services), Kalanderplatz 1, 8045 Zurich, Switzerland (brigitte.hefti@credit-suisse.com)
Launch date: September 13, 2007
Assets under management: $171.6 million (April 27, 2011)
Net cumulative performance since inception: 45.71% (September 13, 2007 to March 31, 2011)
Annualised return: 11.50% (since inception to March 31, 2011)
Annualised volatility: 8.78% (since inception to March 31, 2011)
Sharpe ratio: 0.99 (since inception to March 31, 2011)
Strategy: directional equity long/short
Share classes: euro, Swiss franc, US dollar
Administrator: Northern Trust, Guernsey
Auditor: KPMG, Guernsey
Custodian: Goldman Sachs and Credit Suisse
Prime broker: Goldman Sachs and Credit Suisse
Legal counsel: Carey Olsen and Simmons & Simmons
Domicile: Guernsey, Channel Islands
Management fee:  2%
Performance fee:  20%
Minimum investment:  €/$/Sfr 250,000
Lock-in: none
Redemption/liquidity terms: monthly (change to weekly to come into effect in 2011)