Hedge Fund Awards 2015

Hedge Fund Awards 2015 www.acquisition-intl.com 38 Risk/Return Focused Independent Asset Management Boutique - Switzerland Medicis Alternative Option Founded in 1999, SAGM Médicis is a company specialised in consulting and asset management for private customers , as well as invest- ment fund management. Olivier Armangau, Asset Manager, told us more about the firm and gave us his thoughts on the wider industry Following the long tradition of Swiss finance, our business has its roots in independent asset management for an international clientele. This business has been recently complemented by the addition of fund management activities, with a special focus on optimising the balance of performance risk vs. return. It has become increasingly complicated to work within a business structure such as ours. Under the pretence of investor protection, the industry has experienced profound changes resulting from a barrage of extraordinarily expanded regulation. Within this context it has become increasingly difficult for small businesses to remain viable and preserve their independence. If we fail to recognize the scale and consequences of these changes, our industry risks losing its current diversity and degrading into a small number of giants. Our fund The Médicis Alternative Option Fund targets an absolute return using a strategy based on Listed EuroStoxx 50 options (most liquid options traded on European exchanges). Due to the fact that the fund strategies are based on plain vanilla out of money options, the fund’s performance is less correlated to market direction and depends essentially of volatility and time value.The fund’s goal is to achieve this return with a low level of annual standard devi- ation. The use of short dated options, a disciplined approach to profit taking and stop losses and a dynamic position management destined to achieve delta neutrality (i.e. market neutrality) are the main drivers of the lower volatility of our returns. Risk management is the corner stone of our style in order to achieve an optimal risk/reward ratio. The fund does not take direc- tional views, not does it try to arbitrage the terms structure, it simply seeks to optimize its option positions in view of the level of the market (the EuroStoxx 50 index) and the volatility level of the index. The fund it’s usually a seller of volatility (especially after a volatility spike) using various strategies. The short convexity risk related to a short option position is managed by a continuous monitoring and the adjustment of the delta of our portfolio. The fund has two main components: A systematic component, often using trades with a minimum of two “legs”, where the directional risk is hedged. Only in a very low volatility environment will the fund hold directional exposure, as a result of the low attraction of the short option strategies in such an environment. An opportunistic component in case of a noticeable drop in the index level. The increase in volatility which is characteristic of such pull backs, it’s used to sell options. These positions are not “covered” but they are implement- ed in a manner that does not affect the market exposure (neutral) and the volatility exposure of the portfolio. The industry today The hedge fund industry is in a delicate period at present, with a record of fund closures since 2009 caused by subpar performances numbers. Massive monetary stimuli by central banks have biased valuations, correlations, and above all they have significantly reduced, or made irrelevant the role of valua- tion fundamentals. Predictably, the Global Macro funds have suffered, while long-shorts funds fair slightly better, both are having difficulties as they lag market performance. In such an environment hedge fund managers have lost their edge, but we are convinced that things will return to normal and that the industry will succeed at bringing back an excellent risk adjusted performance. Notwithstanding the fact that we have no access to the European markets, Switzerland, and cities such as Geneva and Zurich in particular, continue to be important centres of expertise where all major players in the global finan- cial industry have a presence. This has prompted our authorities to monitor this activity significantly and has left very little room for smaller managers. This propensity to always be first class with our famous “Swiss finish” could adversely affect the development of fund management. A multitude of actors will have no choice but to consolidate, to move away to more pragmatic jurisdictions, or simply will cease to exist. Our awards success Being named Risk/Return Focused Independent Asset Management Bou- tique - Switzerland is a recognition that highlights our philosophy, notably our independence and our approach to performance based on a risk vs. return perspective. In addition we are particularly mindful of the “boutique” concept which emphasizes a spirit of independence and relevance, and offers an alternative to large scale industrial structures. Receiving Acquisition International’s award is a recognition of work that has been accomplished over a number of years. It is also a showcase that allows us to better communicate about our funds, and more broadly on our approach based on coupling returns and risk. This award will also allow us to strengthen our brand with our investors in a highly competitive market. One of the key factors to success in managing investment funds is the under- lying legal structure. Before even considering a product’s performance and risk-return profile, a fund selector or investor will first vet the legal structure of the product. To date, all of our funds are domiciled in Jersey (UK). Although this already provides a high standard of regulation, particularly for Anglo Saxon investors, the European standard UCITS (Undertakings for Collective Investments in Transferable Securities) has become a ‘brand’ of such a strong confidence in the world of collective management that we have decid- ed to take steps to comply with this international standard in order to ensure our future development. At the same time , we are working to expand the range of our funds all the while maintaining the same philosophy of coupling performance to risk, but with differing strategies. n Company: Medicis Email: [email protected] Website: www.sagm.ch Address: Rue de Candolle 16, 1205 Geneva, Switzerland Phone: +41 22 322 29 29 Fact File Risk/Return Focused Independent Asset Management Boutique - Switzerland