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A ranking of “green” hedge-funds. February, 2015

17 February 2015

The new records of the American indexes did not make people wait too long. Index S&P500 and Do –Jones established new historical maximums in February. Index S&P500 increased by 5.5%. EAM Stocks&Derivates Strategies S.P.’ has established a new record as well by continuously increasing for 7 months in the row. It is certainly would be great if the hedge-funds do not decrease and clients would receive a good profit. Fortunately, those hedge funds exist. HedgeCo publishes new ratings of the hedge-funds which have never got a negative result for a month. I made a list of five the biggest and the most profitable hedge funds from those 20 presented in the publication. Let’s see the results:

Fund name

Fund assets

Sharpe ratio

YTD

Regan Capital Distressed Credit Fund, L.P.     

Inception: Aug 2011 / Fund style: Fixed income 
Location: Dallas, Texas, US

152,800.00mil

4.99%

1.02%

Direct Lending Income Fund, LP

Inception: Nov 2012  /  Fund style:  Asset Based Lending  & Fixed Income Location: Los Angeles, California, US

107.41mil

13.27%

12.21%

Luxembourg Life Fund Long Term Growth Fund Class K (USD)

Inception: Feb 2013 / Fund style:  Fixed Income
Location: Luxemburg, NA, LU

72.27mil

11.09%

1.46%

Global Forestry Growth Fund     

Inception: Apr  2011  Fund style:  VC/Private Equity  & Commodities 
Location: Luxemburg, NA, LU

34.74mil

13.91%

7.36%

FTM Limited     

Inception: Ìàr 2010  /  Fund style:  Finance  & Health Care 
Location: Port Vila, Efate, VU

3.66mil

8.37%

0.75%

The table presents the Sharpe ratio. The Sharpe ratio is one of the most popular investments’ indicator. It is included in almost every investment report of the hedge fund industry. For the majority investors, the annual return of the investment product is the most important characteristic when making a decision about investments. However, there are many questions to ask when looking only at income. For example, how do to compare funds with equal income and find the riskiest one? What does it mean to be riskiest one?  The Sharpe ratio answers on such questions about risk.

The Sharpe ratio is a way of the excess return of the fund over the yield on risk-free assets such as treasury bonds. The higher the Sharpe ratio the more successful management, and therefore the more effective management strategy. On the opposite side, management is inefficient. A negative rate shows that it is more profitable to invest in the risk-free assets, than to use this management strategy. Let’s now take a look how to evaluate the fund’s efficiency using the Sharp ratio. Following the Sharp rate definition, from the presented table the best fund would be Global Forestry Growth Fund. On the other hand according to comparison of two indicators of Sharp ratio and YTD (year-to-date describes the return so far this year), the  Global Forestry Growth Fund’s Sharp ratio is not much higher than  Direct Lending Income Fund, LP’s one, even though Direct Lending Income Fund, LP ’ s income is much higher. Due to that, it is a wrong decision to make a choice based only on the return. Investors should consider a complex of indicators including the expectations of the taking risk and time.  Fund’s selection of the investments according only to one indicator (usually return) was investigated by my partner and chief-trader, Alexander Kurguzkin, based on the Warren Buffett’s fund example. This year the Buffett’s fund is celebrating its 50th anniversary. What alternatives does Berkshire Hathaway have? Alexander evaluated not just the return, but also a volatility (risk). It turned out that the market has other available alternatives to Buffett’s fund such as a quantitative value ETF. The pioneer of this investment product is PowerShares Dynamic Large Cap Value ETF (PWV). PWV is a fund which invests 90% of its assets in shares which compose the index. It has the history of just 10 years and that’s is why it is possible to compare only for that period of time.

On the graph, PWV is presented by the blue line, and the Buffett’s fund is the red line:

ETFvsBaffett

 The lack of a clear trend suggests that the Buffett’s fund outruns PWV fund for return only due to the higher volatility (risk):

BaffettvsETF

Here you can read the original and other articles of Alexander Kurguzkin.

I would like to remind you again that chosen in this example funds using just Sharpe ratio and/ or return shows that the selection of the investment cannot be only based on one indicator. The example with the Buffett’s fund also supports this idea. It is necessary to include complex of investment indicators in conjunction with investment expectations.

“Russian” Hedge Fund rating

Last year I was presenting an online edition of SPEAR’S ratings. Unfortunately, in comparison to other international editions of hedge fund industry, the SPEARS edition does not publish operative information about the results of the hedge-fund’s performance. I will provide a comparative table of the income of the best, in my opinion, hedge funds that are focused on Russian investors in comparison with our hedge fund since the beginning of 2015.

Fund name

Performing the fund for February, 2015

YTD

Kvadrat SPC

Inception: Aug 2013 / Fund style:  Option strategies & Arbitrage

Location: Grand Cayman, NA, KY

0.57%

1.41%

Copperstone Alpha Fund

Inception: Jan 2012 / Fund style: Value  & Event Driven

Location: Grand Cayman, NA, KY

7.97%

14.19%

EAM Stocks&Derivatives Strategies S.P.

Inception: Feb 2013 / Fund style: Option strategies & Fixed income

Location: Grand Cayman, NA, KY

0.12%

3.22%

If you have any questions about our hedge fund or you need a consultation with a hedge fund selection for the investment fell free to write us. We are always happy to answer your questions!

Denis Eganov & Alexander Kurguzkin

info@eampartners.com

March 10, 2015

 

 

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