Winner: Best convertible arbitrage/volatility hedge fund; Winner: Hedge fund of the year

Steven Roth has been portfolio manager of GLG's market neutral hedge fund since November 2005 when he joined from Deutsche Bank's European convertible business.

He takes a top-down and a bottom-up approach when looking at a range of ideas across the credit spectrum: special situations, change of control language and volatility driven ideas to name a few.

His team uses internal systems to screen the market for certain criteria which are then filtered and sorted. This acts as a primary screen and is followed by further fundamental technical analysis before a technical decision is taken.

The lack of issuance within the convertible market over the last two years has impacted Roth's fund: this has created a supply and demand imbalance which has made new opportunities harder to pinpoint, despite being positive from a valuation perspective.

One opportunity set that Roth has located lies in the contingent convertible (CoCo) bond market and its potential to take off. If there is a $500 billion to $1 trillion refinancing of European bank capital and a percentage of that is done via the convertible market, there would be a significant increase of the European convertible universe, Roth argues.

He believes his fund is in prime position to take advantage of such a scenario due to his team's familiarity with Europe's banking community. "Some managers don't really like financials as they're quite difficult to analyse so they tend to focus more on corporates," Roth says. He and his team by contrast are comfortable with financials and have been working closely with the banks since these products evolved.

"In the Credit Suisse deal we worked very closely with them to discuss pricing, structure, valuations etcetera. We continue to have dialogues with the banks that are trying to decide how these securities should evolve. When we eventually get to a broader opening-up of the market we will be very well placed because of our understanding of the product," he explains.

The team is split between London, Hong Kong and New York focusing on the European Union, the US, Japan and Asia. Roth will decide on and review any large positions although he also works alongside several other portfolio managers who operate with some autonomy in terms of managing a pool of capital.

Within GLG there is a lot of collaboration. There are weekly meetings with the entire macro group which Roth describes as a "very good forum to discuss the top-down views that we formulate." There is also a weekly meeting with all of the fund managers to discuss relevant activity in their area of expertise.

This means that on a daily basis Roth and his team have direct contact with specialists from other funds. "If we happen to be looking at a name in the energy sector, we can talk to the manager who runs the energy fund. As they look at things from a different angle it is nice to bounce ideas off them," he explains.

The most innovative idea for keeping the company's managers at the forefront of industry changes has been introducing seminars with guest speakers.

So far these have included David Rosenberg, the economist now at investment management company Gluskin Sheff, and Nuriel Roubini, professor of economics at New York's Stern School of Business, alongside leading consultants, bank specialists and economists.

Roth is circumspect about the fund's future performance. "The next 12 months can only be harder than it has been over the last two years. 2009 was a beta game and it has since become an alpha game so we will focus on maintaining more of a balanced book by adding to our positions on the short side – there are definitely names that have become very stretched," he comments.

"The elephant in the room is the sovereigns in the developed world – more significantly the US, Japan and the UK. That is the one risk factor that could create a major volatility event – i.e. a default or a dramatic repricing of rates. I'm not sure it's going to happen this year but we're certainly not heading in the right direction," he cautions.

To prepare for such an event the fund operates a tail-risk strategy. Roth tries to keep leverage as low as possible.

Over the past 12 months the most frustrating challenge for the fund has been raising assets. Roth believes that 2008 is sticking in peoples' minds and relative value strategies remain "very unloved". "Trying to convince people that the risk profile today is very different to that going in to 2008 is very difficult, not just in terms of our fund but in terms of the market in general," he comments.

To combat this, Roth plans to keep concentrating on delivering strong performance. "Our main focus is on returns and we've generated a lot of organic capital growth through performance. We're quite happy to continue with that strategy," he affirms.

The fund will be closed to further investment when it reaches $1 billion in assets under management (AUM). At $914 million it is getting close and Roth expects to reach $1 billion AUM by 2012.

Fund facts
Full name of fund: GLG Market Neutral Fund
Name of portfolio manager: Steve Roth
Name of investment/management company: GLG Partners
Contact information: GLG Partners, 1 Curzon Street, London W1J 5HB (+44 (0)20 7144 1000; www.glgpartners.com)
Launch date: January 15, 1998
Assets under management: $914 million
Net cumulative performance since inception: 666.46% (at March 31, 2011)
Annualised return: 16.66% (at March 31, 2011)
Annualised volatility: 16.08% (at March 31, 2011)
Sharpe ratio: 0.83 (at March 31, 2011)
Strategy: convertible artbitrage, market neutral
Share classes: US dollar, euro, sterling and yen
Administrator: BNY Mellon Fund Services (Cayman)
Auditor: Ernst & Young
Custodian: BNY Mellon Fund Services (Ireland)
Prime brokers: Credit Suisse Securities (Europe), Goldman Sachs International, Morgan Stanley & Co. International, UBS, Deutsche Bank
Legal counsel: Walkers
Domicile: Cayman Islands
Listing: Irish Stock Exchange
Management fee: 2%
Performance fee: 20%
Minimum investment: $100,000 or an equivalent amount in euro, sterling and yen
Lock-in: none; the fund's directors may suspend redemptions in the circumstances described in the fund's prospectus
Redemption/liquidity terms: monthly with 90 calendar days' notice