The top performing hedge fund in Australia*, the Tribeca Global Natural Resources Fund, has delivered a return of 113% percent for the calendar year to date (net), based on a concentrated and active strategy in global natural resources.
The fund is a long/short global natural resources fund focusing on large liquid opportunities in equities, credit and commodities. It takes the view that the inherent volatility in the natural resources sector rewards an active approach, while the cyclical nature of the sector benefits from a long/short strategy.
Co-portfolio manager Ben Cleary said that some of the best months for the fund during the year have been during general drawdown months.
“During January and June, for instance, we were up 17 percent and 17 percent respectively, which goes against the market trend.
“The majority of our returns in 2016 have come from the precious metals, energy, soft commodities and specialty sectors, with the largest geographic contributors being North America and Australia.
“Looking ahead, we see a number of interesting market structure issues in the natural resources sector. Generally speaking, most major commodity producers remain heavily indebted, having overinvested at the top of the market, and they are not able to take advantage of what appears to be a bottoming of the sector. This is an ideal backdrop for a long/short manager to take advantage of capital raisings, mispriced assets and cheap volatility.”
Craig Evans, co-portfolio manager, said that the natural resources sector is inherently volatile which creates a persistent opportunity to deliver positive absolute returns regardless of macro conditions.
“By using a low net, low gross, concentrated and active strategy, we believe you can generate returns without the use of leverage, and by utilising cash as the best hedge.
“In the lead up to market events where we have no edge – for instance, the Brexit vote – we generally build cash, which leaves us in a good position to put money to work and buy natural resource stocks that had been sold off but that clearly would not be impacted by goings-on in the UK.
“It is volatility that creates opportunity and when that volatility strikes, you want to be able to go long and short to capture it.”
Mr Evans added that the hedge fund industry has evolved significantly in recent years, with increasing investor interest in hedge fund strategies.
“While it has taken some time for investors to truly embrace hedge funds, particularly Australian investors, we sense a change in the air.
“There has been a great deal of work within the industry to educate investors about the inherent risks in some portfolios, and that they need to protect themselves from the dire situation when both equities and bonds are down.
“Investors need something in their portfolios that provides them with absolute returns after fees, something uncorrelated and that provides some protection when they need it.”
Tribeca recently launched a Cayman vehicle for the Tribeca Global Natural Resources Fund to meet the growing demand from international investors.
Mr Cleary said that this demand is proof that Australian based hedge fund managers can compete on a global stage and hold their own.
Tribeca manages assets of $2.4 billion overall, with close to $1 billion invested in hedge fund strategies.
Tribeca Investment Partners is an Australian based, boutique fund manager with a reputation for delivering on performance targets. It was established in 1998. Our clients are those who actively seek innovation beyond the mainstream. Distinct in our market, we blend traditional fundamental qualitative research with quantitative analysis. We combine quality investment decisions with the insight of successful experience.
Our retail distribution partner is Grant Samuel Funds Management. Grant Samuel is an independent funds management firm, with over $6.4 billion in assets under management as of 30 June 2016. Grant Samuel specialises in marketing funds managed by high calibre local and international managers to the Australian market.