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Portfolio > Alternative Investments > Hedge Funds

Exchange-Traded Hedge Fund Thrives

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NEW YORK (–One of the earliest hedge fund vehicles to trade on a public exchange, London- and Zurich-listed Altin AG, had a return of better than 9% in dollar terms and 10.75% in sterling in 2005.

By comparison, both the Credit Suisse/Tremont multi-strategy index and the HFR fund of funds index increased about 7.5% for the year.

This year Altin has gained over 6% to date. The fund’s manager, the alternatives arm of Swiss bank Syz & Co., attributes the strong performance to an investment approach of combining a large group of well-established hedge funds with small niche managers.

Long-time funds that are closed to new investors account for over 80% of the portfolio, the firm said in a release. The remainder of the portfolio consists of a diversified pool of managers in new strategies and geographical regions that are expected to provide high returns.

One contributor to performance was Altin’s move away from convertible arbitrage and multi-strategy arbitrage in 2005 while it increased allocations to long/short equity funds active in Europe, Japan and emerging markets. The convertible arbitrage strategy in general has gone downhill, apparently due to over-crowding in that market.

After a rough first half, the fund benefited from high returns in long/short equity and macro funds in the second half of the year, the firm said.

Since its inception in December 1996, Altin has returned 9.72% annually on average as of Jan. 31 this year. It was listed on the Zurich exchange at inception and on the London exchange in December 2001.

Eric Syz said in a statement that U.K. investors now represent approximately 40% of the shareholders. “London is a very active market for closed-end investment companies and

Altin has developed a loyal shareholder base in the U.K.,” he said.

Traded funds of hedge funds are a fast-growing segment, providing daily liquidity of shares for investors while allowing managers to deploy assets without worrying about redemptions. Listed funds of funds in London, Toronto and Zurich had US$5.6 billion in assets as of last month.

Like many traditional exchange-traded funds, Altin’s stock price tends to stay below its net asset value. In 2005 the share price did not increase as much as NAV, causing the discount to widen, but this year the stock has been in a steep ascent. Measures are in place to align the fund’s share price with asset value.

The manager, Syz’s 3A – Alternative Asset Advisors, has more than US$2 billion in hedge fund assets in several vehicles.

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Contact Bob Keane with questions or comments at [email protected].


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