Key Takeaways
- • Axa IM's All Weather fund of hedge funds strategy won three awards at the Hedge Funds Review European FoHF Awards 2015 for best diversified FoHF over $500 million across one, three, and ten-year periods, while Axa IM also received the best institutional FoHF provider award.
- • The strategy maintains a concentrated portfolio of 20–25 funds with low annual manager turnover (approximately 20% reallocation yearly), targeting absolute returns across any macroeconomic environment rather than relying on macro forecasting.
- • All Weather deliberately invests in medium-sized managers to avoid information leakage risks associated with mega-fund operations and the structural challenges of smaller managers, with the 10 largest holdings representing approximately 70% of the portfolio.
- • Global macro positioning generated a substantial portion of returns in 2015, with the fund's managers successfully avoiding crowded trades in that segment, demonstrating the strategy's nimbleness in navigating market dislocations.
- • Eric Lhomond, global head of alternative credit and alternative solutions at Axa IM, emphasizes that high conviction, rigorous due diligence, and portfolio concentration are core to avoiding investment mistakes in the contemporary alternative investment landscape.
Summary
Axa Investment Managers' All Weather fund of hedge funds strategy has demonstrated consistent multi-year performance, capturing three awards at the 2015 Hedge Funds Review European Fund of Hedge Funds Awards. The strategy achieved recognition as the best diversified FoHF over $500 million across three separate measurement periods—one year, three years, and ten years—while Axa IM itself was named best institutional FoHF provider. This multi-horizon recognition underscores the strategy's sustained ability to deliver returns across varying market cycles and investor timescales.
The All Weather strategy departs from traditional macro-dependent fund selection by targeting absolute returns in any potential macroeconomic environment. Rather than forecasting economic conditions and tilting manager allocations accordingly, the strategy prioritizes consistency of approach and high-conviction manager selection. This philosophy yields relatively low portfolio turnover, with approximately 20% of manager allocations reallocated annually, allowing for deeper relationships and more thorough diligence on core positions.
The fund's portfolio structure reflects a concentrated approach, holding 20–25 managers with the single largest position representing one-tenth of assets and the ten largest holdings constituting roughly 70% of the portfolio. Eric Lhomond, global head of alternative credit and alternative solutions at Axa IM, attributes this concentration to the conviction-based process: larger allocations to core positions incentivize careful fund selection and reduce the temptation to chase performance-chasing crowd trades. The strategy deliberately targets medium-sized managers, avoiding both the information leakage challenges that plague large multi-billion-dollar fund operations and the operational risks inherent in nascent managers. Lhomond specifically notes concerns about information leakage at mega-fund scale, where "people talk about your trades and your positioning, and you can get picked off by dealers."
The strategy's 2015 performance benefited materially from global macro positioning, where managers demonstrated an ability to navigate away from consensus positions and crowded trades. This tactical agility in avoiding crowded segments demonstrates how a disciplined, high-conviction allocation process to nimbler global macro specialists can generate alpha during periods of market stress or dislocation.
The All Weather strategy departs from traditional macro-dependent fund selection by targeting absolute returns in any potential macroeconomic environment. Rather than forecasting economic conditions and tilting manager allocations accordingly, the strategy prioritizes consistency of approach and high-conviction manager selection. This philosophy yields relatively low portfolio turnover, with approximately 20% of manager allocations reallocated annually, allowing for deeper relationships and more thorough diligence on core positions.
The fund's portfolio structure reflects a concentrated approach, holding 20–25 managers with the single largest position representing one-tenth of assets and the ten largest holdings constituting roughly 70% of the portfolio. Eric Lhomond, global head of alternative credit and alternative solutions at Axa IM, attributes this concentration to the conviction-based process: larger allocations to core positions incentivize careful fund selection and reduce the temptation to chase performance-chasing crowd trades. The strategy deliberately targets medium-sized managers, avoiding both the information leakage challenges that plague large multi-billion-dollar fund operations and the operational risks inherent in nascent managers. Lhomond specifically notes concerns about information leakage at mega-fund scale, where "people talk about your trades and your positioning, and you can get picked off by dealers."
The strategy's 2015 performance benefited materially from global macro positioning, where managers demonstrated an ability to navigate away from consensus positions and crowded trades. This tactical agility in avoiding crowded segments demonstrates how a disciplined, high-conviction allocation process to nimbler global macro specialists can generate alpha during periods of market stress or dislocation.
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