Key Takeaways
- • Credit Suisse's Prima Multi-Strategy Fund won best UCITS-compliant Fund of Hedge Funds (FoHF) award at Hedge Funds Review European Fund of Hedge Funds Awards 2015, earning recognition for manager quality and strategy fit over top-down allocation mandates.
- • Equity long/short positions comprise 45% of the portfolio, delivering strong returns through low-beta, high-alpha European equity exposure amid eurozone recovery and divergence between high and low-quality equities.
- • Macro and managed futures represent 28% of allocations, while relative-value strategies (primarily equity market-neutral) make up 13%, reflecting deliberate efforts to navigate UCITS constraints on strategy availability.
- • UCITS regulations impose significant operational constraints, particularly commodity futures trading restrictions, which portfolio manager Stéphane Julen identifies as the primary regulatory impediment; leverage ceilings are less problematic given maximum value-at-risk measures allow up to 10-times leverage.
- • Portfolio construction relies on alternative exposure mechanisms within UCITS limits, including commodity ETF access for managed futures and equity shorting (e.g., mining stocks) for equity managers seeking commodity market participation.
Summary
Credit Suisse's Prima Multi-Strategy Fund captured the best UCITS-compliant Fund of Hedge Funds accolade at the 2015 Hedge Funds Review European Fund of Hedge Funds Awards, reflecting the firm's disciplined approach to manager selection and strategy construction within regulatory boundaries. Portfolio manager Stéphane Julen emphasized that manager talent and optimal fit for UCITS compliance take precedence over mechanical strategy filling, stating: "We're not going to buy managers just to fill a strategy."
The fund's allocation strategy reflects both conviction and pragmatism. Equity long/short positions dominate at 45% of the portfolio, capitalizing on favorable market conditions characterized by low beta and high alpha generation, particularly within European equities. Julen attributed this outperformance to improved eurozone fundamentals and emerging quality divergence between high and low-quality equity names, supported by elevated volatility levels that enhanced stock-picking opportunities. Macro and managed futures strategies comprise 28% of holdings, while relative-value approaches—predominantly equity market-neutral strategies—represent 13% of allocations.
Despite the fund's success, Julen acknowledged ongoing challenges posed by UCITS regulations. Most significantly, restrictions on commodity futures trading present operational constraints that limit strategy implementation. However, he noted that leverage ceilings pose less practical difficulty, with maximum value-at-risk measures permitting up to 10-times leverage within UCITS parameters. The portfolio has adapted by accessing commodity exposure through alternative vehicles: managed futures employ commodity ETFs, while equity managers gain commodity market participation through direct shorting of mining equities—a tactic that has proven profitable. Julen emphasized that "plenty remains to be done" regarding UCITS framework constraints, noting that anticipated UCITS VI derivative liberalization initiatives appear to have been abandoned, leaving the regulatory environment restrictive relative to institutional hedge fund structures.
The fund's allocation strategy reflects both conviction and pragmatism. Equity long/short positions dominate at 45% of the portfolio, capitalizing on favorable market conditions characterized by low beta and high alpha generation, particularly within European equities. Julen attributed this outperformance to improved eurozone fundamentals and emerging quality divergence between high and low-quality equity names, supported by elevated volatility levels that enhanced stock-picking opportunities. Macro and managed futures strategies comprise 28% of holdings, while relative-value approaches—predominantly equity market-neutral strategies—represent 13% of allocations.
Despite the fund's success, Julen acknowledged ongoing challenges posed by UCITS regulations. Most significantly, restrictions on commodity futures trading present operational constraints that limit strategy implementation. However, he noted that leverage ceilings pose less practical difficulty, with maximum value-at-risk measures permitting up to 10-times leverage within UCITS parameters. The portfolio has adapted by accessing commodity exposure through alternative vehicles: managed futures employ commodity ETFs, while equity managers gain commodity market participation through direct shorting of mining equities—a tactic that has proven profitable. Julen emphasized that "plenty remains to be done" regarding UCITS framework constraints, noting that anticipated UCITS VI derivative liberalization initiatives appear to have been abandoned, leaving the regulatory environment restrictive relative to institutional hedge fund structures.
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