Shortlist: Best new hedge fund

Delphine Sitbon, founding partner and investment manager, set up LD Capital with CEO Luc Sitbon. Delphine had eight years of experience in investment banking, mainly spent at the Royal Bank of Scotland. Luc was a former managing director at Bank of America. He left Bank of America in May 2009 after the merger with Merrill Lynch and decided to join the project.

The original intention of LD Capital was to manage personal assets. The first investment was made in November 2008, at the height of the financial crisis. While this may be seen as a rather odd moment to enter the market, the Sitbons believed the strategy of buying undervalued stocks in selected industries was a good one to follow. “It was right and we started building the portfolio,” says Luc Sitbon. The Marlon Fund began trading in August 2010.

The strategy of the fund is stock picking with a macro overlay. “We focus on US-listed mid caps, which can include ADRs of emerging market companies,” explains Luc Sitbon.

“Since we started trading for the fund, our equity exposure has been as low as 30%, up to a maximum of 80%. We use cash, bonds and derivatives to mitigate risks and/or to position the portfolio in a desired way,” he says.

LD Capital’s main strength is that the two Sitbons have complementary backgrounds. “First of all, we are confident that the stocks that are included in the portfolio have strong fundamentals and high growth potential [Delphine’s part]. Second, we believe that it is crucial to monitor events in rates, credit and foreign exchange markets, since they often have an impact on equities in general,” he says.

Risk management is embedded in the portfolio construction. “In theory the maximum exposure towards a single security does not exceed 10%. In practice we rarely go over 7% at the trade’s inception. We have hedges in place and a stop-loss policy,” he explains.

The investment manager implements a blend of top-down and bottom-up strategy, focusing on macroeconomics and carrying out fundamental analysis to identify companies for potential investment in the portfolio.

LD Capital invests in 15 to 50 companies with significant growth potential and whose valuations, the investment manager believes, are attractive.

“One of the great advantages of investing in US-listed securities is the depth of the US market,” explains Sitbon. “The fact that a liquid options market exists for each and every company that we monitor is very helpful. At launch we did not have a seed investor as such. We were the first investors, having invested a significant part of our personal assets into the fund. Other investors are currently high net worth individuals and we are looking to attract new investors and grow the fund to our initial objective of $100 million,” he concludes.

Fund facts
Full name of fund: Marlon Fund
Name of portfolio managers: Delphine Sitbon and Luc Sitbon
Name of investment/management company: LD Capital
Contact information: Luc Sitbon, 83 Baker Street, London W1U 6AG (luc.sitbon@ld-capital.com; www.ld-capital.com)
Launch date: August 9, 2010
Assets under management: undisclosed
Net cumulative performance since inception: 18.54%
Annualised return: 25.44%%
Annualised volatility: 15%
Sharpe ratio: 1.6
Strategy: absolute return, long bias equity (US market with some emerging marekts) with macro overlay
Share classes: US dollar, euro and sterling
Administrator: Apex Funds Services
Auditor: PricewaterhouseCoopers
Custodian: HSBC
Prime broker: Interactive Brokers
Legal counsel: Ganado and Associates, Malta
Domicile: Malta
Management fee: 1.5%
Performance fee: 15%
Minimum investment: $150,000
Lock-in: none
Redemption/liquidity terms: monthly subscriptions and redemptions; no gates