Beachhead Equity Hedge Dynamic Beta

Transcription

1 Beachhead Equity Hedge Dynamic Beta

2 Strategy Overview: Beachhead Equity Hedge Dynamic Beta seeks to deliver equity-like returns over a market cycle with bond-like risk. Specifically, the strategy is designed match or outperform a diversified portfolio of leading equity long/short hedge funds by investing only in the broad drivers of returns through low cost, liquid ETFs. Live performance and supporting research demonstrate conclusively that dynamic asset allocation among broad asset classes is the principal driver of hedge fund performance and alpha (after fees). By identifying those shifts, the strategy is able to outperform the vast majority of hedge funds over time with less risk, superior liquidity and low costs.

3 Strategy Philosophy: In order to match or exceed the returns of a portfolio of hedge funds, Beachhead uses quantitative models to analyze the historical performance of the portfolio over the preceding fourteen months and seeks to determine which market segments have been the principal drivers of returns. Substantial research and live trading has demonstrated that the drivers of returns over the preceding fourteen months will be very similar to those in the coming month or months; consequently, by investing in those market instruments in the appropriate weights, Dynamic Beta seeks to deliver returns that, over time, will approximate or exceed those of the target portfolio.

4 Portfolio Construction: Portfolio construction is model-driven. That is, a quantitative model is used to analyze the historical hedge fund returns, and this model delivers a recommended portfolio of financial instruments. The principal inputs for the quantitative model are the monthly returns of the requisite hedge fund index and the price-based returns of the relevant market factors. The investment process consists of a monthly rebalancing during which the returns of the target over the prior 14 months are analyzed using Beachhead s proprietary analytical software. The Dynamic Beta model subsequently generates a portfolio of instruments and their corresponding weights that should match or exceed the returns of the target going forward.

5 Risk Management: The Equity Hedge Dynamic Beta LO portfolio is longonly and gross exposure is constrained to a maximum of 98%.

6 Winning Trade The model has historically utilized the dollar index as a hedge against its equity exposure. A strong dollar will typically weigh on U.S. corporate earnings as revenues earned in foreign currencies translate into fewer U.S. dollars once repatriated and exporters will find it more difficult to sell their more expensive dollar-denominated goods abroad. Consequently, the two asset classes have often been negatively correlated to one another. Long exposure to the dollar index helped the strategy to post a positive return of 0.9% in January 2015 during a month in which the S&P 500 declined -3.0%.

7 Losing Trade The Equity Hedge Dynamic Beta Long Only model presciently eliminated its exposure to emerging markets in late 2014, as the sector entered a protracted downturn. Emerging markets lost nearly - 15% in 2015 alone. However, the cost of de-risking prior to this calamitous downturn has been that the model has missed out on the subsequent rebound in 2016.

8 Company Overview: Beachhead Capital Management, LLC ( Beachhead ) specializes in providing investors with a systematic liquid alternative solution called Dynamic Beta. Beachhead s research efforts date to 2007 when the firm s principals pioneered a liquid alternative to investing directly in hedge funds. The strategy outperformed its target during the financial crisis of 2008 and Beachhead s principals sought to provide the strategy to investors in managed accounts after taking note of the flight to liquidity in the wake of the crisis. The first Dynamic Beta managed account was launched in 2010 and the first Equity Hedge Dynamic Beta managed account was launched in Beachhead was selected to be the sole sub-adviser to the SEI Long/Short Alternative Fund in 2014 and the sole sub-adviser to the SEI Liquid Alternative UCITS fund in 2015.

9 Management Bios: Mr. Beer is the Founder and Managing Partner of Beachhead Capital Management, LLC where he serves as Co-Portfolio Manager of the firm s Dynamic Beta investment strategies, including the sub-advisory relationship with SEI Investments. Mr. Beer has been in the hedge fund business since 1994, when he joined the Baupost Group, Inc., one of the world s premier hedge fund firms. In 2003, Mr. Beer was a co-founder of and, through a family investment company, the lead initial investor in Pinnacle Asset Management and related entities, a leading commodity investment firm and recipient of numerous industry awards. Mr. Beer was also a founder of Apex Capital Management, one of the earliest hedge funds focused on the Greater China region that grew to approximately $1.5 billion in assets prior to the financial crisis. Earlier in his career, Mr. Beer was a mergers and acquisitions investment banker at James D. Wolfensohn Inc. and was a summer associate at Thomas H. Lee Company, a leveraged buyout firm. Mr. Beer is a frequent speaker on hedge fund investment strategies and industry dynamics and is an active contributor to various industry publications. Additionally, he is the co-founder and lead trustee of the Pierrepont School, an innovative co-educational private school in Westport, Connecticut, and a member of the Board of Directors of the US Fund for UNICEF, where he chairs the Bridge Fund. Mr. Beer received his Master in Business Administration degree as a Baker Scholar from Harvard Business School and his AB degree, magna cum laude, from Harvard College. Mathias Mamou-Mani Mr. Mamou-Mani is Partner and Chief Operating Officer of Beachhead Capital Management, LLC where he serves as Co-Portfolio Manager of the firm s Dynamic Beta investment strategies, including the sub-advisory relationship with SEI Investments. Prior to his current position, Mr. Mamou-Mani served as Chief Operating Officer at Belenos Capital Management and built a proprietary hedge fund analytics and risk management platform. Mr. Mamou-Mani s extensive experience includes quantitative finance, analytics and project management. He served as a consultant to Cap Gemini Sogeti s information technology clients and, prior to that, founded GMB1, an internet services company. Mr. Mamou-Mani received his Master in Business Administration degree from NYU Stern Business School and his Master of Science and Bachelor of Science degrees in computer science from University of Paris Dauphine in France.