AI Issue 5 2017

Acquisition International - May 2017 53 Avance Global: Consistent Returns & Capital Preservation with a Value-Driven / Macro Approach The fund aims to hold approximately 30% of its positions in equity and 55% in fixed income. Avance Global’s superior track record of more than ten years has resulted in the fund being rated with Four Stars by the prestigious Morningstar rating system in the categories of Overall Performance, 10-Year Performance, 5-Year Performance and 3-Year Performance. Avance Global posted a return of +8.4% in 2016 and has delivered an annualised return since inception (January 2003) of +6.0%. Both the 2016 return and annualised return figures have easily surpassed the performance of global equity markets (+6.8% in 2016 / +5.7% annualised since 2003), Global Fixed Income (+3.9 in 2016 / +4.2% annualised), the HFRX Global Hedge Fund Index (+2.5% in 2016 / +3.7% annualised) and the Global Macro Fund Index (-2.9% in 2016 / +1.1% annualised). The positive trend has continued in the beginning of 2017 - as of end of March - the fund has posted a return of +2.5% YTD and has accumulated a return of 12.0% over the last twelve months. One of the key factors that helps to explain Avance Global’s strong track record and ongoing success is its flexibility. The fund takes a benchmark-free approach to investing which offers its clients the widest array of opportunities and an unrestricted approach to risk management. Avance Global can invest anywhere in the world, anywhere in a company’s capital structure (providing there is a good degree of liquidity) and across any currency and it has the flexibility to have very large cash weightings if the manager believes that is the best allocation of capital. The flexibility of the Fund´s investment strategy has allowed the investment team to continuously exploit inefficiencies by investing in the most undervalued market segments and pivoting across asset classes and strategies in a dynamic and value-seeking fashion. Successful asset allocation as well as fundamental research produces two sources of returns and long-term investing enables us to exploit the market’s biggest arbitrage and inefficiency: a focus on short term results. Although our investment process is designed to weather even the harshest of market environments (by virtue of diversification and partial hedging). The fund’s managers believe that long-term investing offers the best opportunities but that tactical moves can also add significant value in the short term. The returns of Avance Global have been delivered in a highly consistent and defensive manner, as evidenced by the fund’s low volatility: 6.0% annualised volatility over the last 5 years. In the last 5 years, the Fund has posted a Sharpe ratio of 1.10 and a monthly hit ratio of 72%. In the last 14 months, the Fund has only had one negative month (September 2016: -0.1%). Moreover, the fund employs no leverage and always maintains sizeable cash exposures (~25% average exposure in 2016), which further underscores the strength of its investment returns during 2016 and in prior years. Avance Global has been able to protect capital significantly better than equity markets in adverse market conditions. For example, in the October 2007 - March 2009 bear market, global equities fell by -55.8% whilst Avance Global dropped by only -16.4%. A more recent example was at the beginning of 2016: by the end of February 2016 (against a backdrop of plunging equity markets which were falling almost -16% globally) Avance Global had dropped only -3.4%. In the current market environment - characterised by excessive optimism and an unwarranted appetite for risk - Avance Global remains defensive and weary of herd behavior. The fund seeks to continue to deploy cash in assets with an attractive risk/reward profile. Currently, the largest exposure is to the equities of pharma/biotech companies, where fundamentals remain strong yet share prices and valuations are historically depressed and trading at material discounts to broader markets and to their historic valuations. This exposure represents over 10% of our holdings. In the Fixed Income space, the management team believes that floating-rate subordinated debt (=low duration) offers the most attractive risk-reward proposition. This strategy represents over 20% of the fund’s holdings.