Optima Asset Management

“THE INCREASED VOLATILITY WE OBSERVE AROUND THE GLOBE, ALONG WITH RECORD LOW INTEREST RATES AND EXCEEDINGLY HIGH EQUITY VALUATIONS, LED US TO PRIORITISE MANAGERS WHO HAVE THE ABILITY TO PROTECT ON THE DOWNSIDE, WHILE AFFORDING REASONABLE UPSIDE DURING BULL MARKET RUNS.”

YEHUDA SPINDLER

CHIEF INVESTMENT OFFICER, OPTIMA ASSET MANAGEMENT

While Optima’s focus is often mandate specific, in general, the expectation for our lower volatility offerings is a continued focus on absolute return and uncorrelated strategies across the CTA, Global Macro, and multi-strategy landscape; for our more directional strategies, a continued emphasis on equity specialists remains in place. Given our expectations for more pronounced monetary policy tightening, credit remains an underweight exposure. The increased volatility we observe around the globe, along with record low interest rates and exceedingly high equity valuations, led us to prioritise managers who have the ability to protect on the downside, while affording reasonable upside during bull market runs. We remain committed to creating innovative strategies that are both compelling and differentiated in the hedge fund space. A number of new trends and developments are taking hold within the hedge fund space. Several high-profile firms have been launching longer lock-up share classes, particularly within multi-strategy funds, to more effectively compete in terms of attracting talent, while mitigating business risk. On the product side, more hedge fund managers have been launching long-only vehicles in addition to hybrid funds designed to invest across both public and private opportunities. The ability to leverage research within a more flexible investment mandate has been a key driver behind this innovation. Overall, Optima believes these trends will continue to accelerate, as hedge funds expand their scope and research capabilities. Over our more than 30-year history, we have allocated to both generalists and sector specialists, given our belief that both types of managers have merit in a multi-manager line-up. In recent years, our sector specialist exposure has been expanding as we prioritise managers with sustainable competitive advantages in their respective areas.

From a thematic standpoint, we remain particularly constructive on the technology, consumer and healthcare sectors, given the strong secular tailwinds. However, we expect to be active in more cyclical parts of the market if we identify compelling stewards of capital. Emerging managers have and will continue to be an important component of our hedge fund universe. However, manager quality, experience and expertise are of utmost importance and, as a result, we have a very high due diligence threshold across all investment candidates. As ESG has become a more critical factor for investors around the globe, Optima’s focus on incorporating ESG considerations into the portfolio process has also risen. We are continuously trying to improve the impact of ESG criteria in our manager selection process. As a result, we are refining certain procedures to attempt to ensure that ESG priorities are a primary component of our due diligence process.