Fund - Unigestion

Background:

Like the rest of the hedge fund industry, Unigestion, the privately owned Geneva-based asset manager, could not escape the hurricane triggered by the financial crash of 2008. But it can take comfort from the fact that it has made a relatively quicker recovery than many competitors who are still struggling to reach their pre-crisis asset levels. Unigestion’s current assets of $12.4 billion mark an enviable rebound from the $11 billion in assets which the firm managed prior to the crisis. And, over the past three-year period, the hedge fund products have also benefited by increasing their assets to $3.8 billion compared to $2.9 billion at the end of 2008.

Hedge fund assets are split almost equally between FoHFs (44%) and segregated mandates (56%). “Since the crisis, we’ve launched seven segregated mandates to meet an increasing demand from institutional clients for these products,” says Jean-François Hirschel, managing director and head of marketing. “Institutional investors have become more cautious regarding whom they are invested alongside as they don’t want to bear the risk of asset volatility, which necessarily occurs with retail clients. The segregated mandates provide the institutions with greater transparency and more control over their liquidity.”

The hedge fund operations are managed by a team of 34 people comprising portfolio managers, analysts and a dedicated risk group. They also have the support of a global network of offices located in London, Paris, New York and Singapore. In recent years, Unigestion has made some significant senior staff appointments, including Philippe Gougenheim, who left Man Investments in 2010 to head Unigestion’s hedge fund business. More recently, Fiona Frick, a 20-year veteran of the firm, moved into the role of group chief executive officer, replacing Patrick Fenal, who was appointed deputy chairman of the board.

Around 70% of the company is owned by the senior management. Since inception, the managers have consistently shown a deep commitment in launching new funds by deploying their own capital alongside the clients’ money.

Given Unigestion’s focus on institutional investors, it’s not surprising that institutions comprise 88% of the client base. High-net-worth families, which are serviced through the Family Investment Office, account for 12%. In geographical terms, the client base is almost totally European, while Switzerland continues to represent the largest market with a 34% share of the clientele.

Due to the ongoing restructuring and consolidation within Geneva’s hedge fund industry, Unigestion has received bids to acquire various smaller FoHF firms – but it has declined the various offers. “Mergers in asset management are very difficult to implement because it’s essentially a people business,” says Hirschel. “You have to be sure that the cultural fit is going to be strong since only the fittest will survive in this environment.”

Since the launch of its first FoHF in 1995, Unigestion currently offers clients seven FoHFs encompassing a spectrum of strategies such as fixed income, commodities, global multi-strategy, arbitrage, global equity and global macro currency. The FoHFs are constructed around three core strategies – tactical trading, arbitrage and equity hedge. “These are the building blocks for all our hedge fund products,” says Hirschel. “We believe in the value we can add by building concentrated portfolios in each style, while ensuring there is minimum correlation between them.”

In 2011, the managers took a view that ongoing bouts of volatility, against an economic background of deflation, historically low interest rates and the substantial growth in emerging markets, would lead to significant opportunities from tactical trading and arbitrage strategies. As a result, they adopted an overweight exposure to these strategies, believing that tactical trading was well positioned to take advantage of volatile markets, while arbitrage would gain from a wave of corporate refinancing stimulated by the low interest-rate environment.

Aiming to benefit from opportunities stemming from the dislocation of the credit market and the distressed cycle, Unigestion launched the Horizon Credit Hedge FoHF in early 2009. Given the high default rates in the distressed market, the managers aim to invest in quality assets from forced sellers. Having delivered an annualised return at the end of July 2011 of xxxx%* with a high Sharpe ratio of 2.76, the fund is meeting its target to generate performance over the longer term in the 10% to 20% range. Despite the initial difficulty of raising money for a new fund at the height of the financial crisis, assets in Horizon Credit Hedge are now at $250 million.

While many large FoHFs in Geneva have been busy enhancing their due diligence and risk management processes since 2008, Hirschel points out that the crisis, which he describes as “the best stress test you could ever imagine”, didn’t necessarily trigger that kind of pressure for Unigestion.

“We have a formal process to improve our due diligence procedures on an annual basis. The team works with a research agenda, throughout the year, which is designed to make the due diligence process more robust. One of our major achievements over the past year, for example, is the ability to provide our clients with aggregated risk measures for their portfolios. When the team meets annually for a full two days, we implement all the amendments and then we rewrite the investment process manual, which all of the members on the team must sign. Although we drew many lessons from the crisis, we preferred to integrate them into a proactive and forward-looking investment process, rather than simply make changes as a reaction to a major event.”

*For performance and contact details, contact Shaun Rajiah +44 20 7779 8367

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