AlphaGen Tucana Fund: Gartmore Investment Management

Best Long/Short Equity Fund: Shortlisted

Operating a European long/short equity strategy, the AlphaGen Tucana Fund is managed within a risk framework that provides scope for a relatively aggressive management style.

Managed by Roger Guy with the support of Guillaume Rambourg and the rest of the team, the fund focuses on large cap, liquid names in core European markets. The fund is typically leveraged with an average gross exposure in 2009 of 120%. It returned 41.7% for investors over the 12 months to December 2009 (US dollar class A).

The investment process is based on active, bottom-up stock selection. The portfolio consists of a blend of core and short-term positions. The core positions, both long and short, are generated through fundamental research and have a long-term horizon. The short-term positions which can be long and short, are those that the managers believe will generate returns over a shorter period of time.

Detailing the typical core positions the managers point to companies that are expected to deliver earnings growth materially above or below market expectations. A core position, whether long or short, will typically have a share price target which is at least 20% above or below the current share price, with the expectation that it will be generally held for at least six months, according to the managers.

The portfolio's short-term positions are typically companies where a specific catalyst has been identified which the managers expect will lead to a change in the share price over the shorter period of time. Such catalysts may include company news, changes in management, earnings releases, broker upgrades/downgrades and competitor activity as well as any other information that is likely to influence share prices over the period.

The managers apply a stop-loss approach to manage risk. They also use liquidity screens.

Despite strong returns in previous years, disappointing results in 2008 saw the managers modify the structure and the management of the fund in 2009.

The investment approach was modified to include short-term positions with a focus now solely on core European markets. Other changes included the fund moving from a two-year soft lock with a 1% management fee and 30% performance fee to a 1%/20% free structure and no lock-up.

The managers wrote to investors in October 2008 advising them of the coming changes and offered all investors a quick exit without any penalty. Liquidity conditions at the time meant many investors took advantage of the chance to cash in with the restul that assets under management fell from just over $1 billion in October 2008 to a low of $201 million in February 2009.

From April 2009 flows became net positive and the fund received, as the managers put it "sizeable subscriptions over subsequent months". The fund ended 2009 with assets of $805 million. Wth a return of over 40% for the year and a 31% gain over the nine months from April, the fund's performance should contiue to attract assets.

Fund facts: AlphaGen Tucana Fund

Full name of fund: AlphaGen Tucana Fund
Name of portfolio managers: Roger Guy and Guillaume Rambourg
Name of investment/management company: Gartmore Investment Management
Contact information: Martin Phipps, 8 Fenchurch Place, London EC3M 4PB (+44 (0)20 7782 2891; martin.phipps@gartmore.com)
Launch date: 2005
Strategy: European long/short equity
Assets under management: $874 million (at March 31, 2010)
Annualised return: 12.2% (at March 31, 2010)
Annualised volatility: 11.5% (at March 31, 2010)
Sharpe ratio: 0.76
Share classes: US dollar and euro
Administrator: HSBC Securities Services
Auditor: KPMG
Prime broker: Merrill Lynch
Domicile: Cayman Islands
Management fee: 1%
Performance fee: 20%.
Minimum investment: $100,000
Redemption/liquidity terms: 30 days' notice for redemptions; no early redemption penalties