FVC Alternative Risk Premia UCITS IV Fund

FVC Alternative Risk Premia
UCITS IV Fund
Strategy
Alternative risk premia and market inefficiencies
are an attractive alternative to alpha, offering an
innovative way of extracting systematic sources
of return which are uncorrelated to traditional
asset classes. Their availability in large numbers
and the low correlations among their returns
make them a powerful investment tool.
Furthermore, they can often be found in very
liquid markets and offer large capacities. FVC
has so far developed ten strategies based on
some of the best-researched alternative risk
premia and market inefficiencies. Over the last
twelve years, these strategies combined in a
portfolio have offered more attractive risk
adjusted returns than a broad portfolio of
traditional hedge fund investments. Correlations
of the strategy returns have been low or even
negative with those of most traditional asset
classes and stayed low during both the dot-com
and the financial crisis, delivering positive
returns during these market corrections.
Long Term Risk & Return Statistics
Annualized Gross
Return
Annualized
Volatility
Sharpe Ratio
Max Draw Down
Correlations
Strategy Portfolio
FVC Alternative Risk Premia
11.51%
6.42%
1.44
-5.22%
1
MSCI World
4.26%
16.88%
0.09
-57.82%
-0.21
DJ UBS Commodity Index
5.76%
16.94%
0.21
-56.89%
-0.10
BofA ML Global Bond Index
4.61%
2.79%
0.67
-2.89%
0.33
DJ CS Hedge Fund Index*
7.48%
6.60%
0.71
-19.68%
-0.12
Monthly Performance Data
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Annual
Performance
1999
1.82% -1.68% 4.20% 2.29% 0.14% 1.42% -1.29% -0.54% 1.96% -0.16% 0.26% 1.41%
10.12%
2000
-0.71% 0.36% -2.54% 3.48% 3.03% -1.09% 0.88% 1.83% -0.19% -0.43% 5.65% 3.53%
14.36%
2001
3.60% -0.04% 2.50% -1.05% 0.56% -0.54% 2.09% 2.20% 4.29% 2.42% 0.34% 0.14%
17.63%
2002
-0.26% 1.29% -3.21% 3.14% 2.95% 3.11% 4.14% 1.71% 2.73% 0.01% 0.52% 4.38%
22.25%
2003
1.58% 3.13% -2.79% 0.66% -0.19% -0.18% -1.79% 0.55% 0.22% 1.29% -0.41% -0.29%
1.65%
2004
1.58% 2.31% 1.77% -2.67% -0.25% 1.06% 1.69% 0.78% 2.43% -0.59% 1.37% 2.93%
13.00%
2005
2.75% -0.88% 2.32% 2.28% 0.73% 4.45% -1.13% 0.00% 3.07% -0.17% 0.95% -0.34%
14.78%
2006
1.72% 0.23% -1.19% 1.29% 0.69% 1.51% -1.52% 3.78% 1.75% 3.08% -0.54% 1.47%
12.84%
2007
1.04% -2.03% -1.28% -0.10% 2.22% 2.36% 0.56% 1.35% -1.26% 1.76% 0.99% -1.24%
4.32%
2008
2.15% 0.87% 0.58% -0.83% 1.70% -1.75% -0.34% 0.51% -0.90% 10.08% 4.85% 1.49%
19.41%
2009
-2.77% 2.77% 3.07% -1.33% -0.18% 1.29% 2.44% 1.65% 2.93% -0.51% 1.03% 1.67%
12.57%
2010
1.81% 0.99% 1.56% 2.02% -0.67% -0.57% 2.75% 2.89% 2.00% 1.07% -2.14% 0.95%
13.28%
2011
-1.30% -0.56% -2.24% 0.85% 1.34% 0.85% -0.39% 5.00% 2.26% -1.94% 2.35% 1.50%
7.75%
2012
3.63% 3.02% -0.82% -0.98% 0.08% 2.39% 1.57% 0.69% 0.01% -1.02% 1.28% -0.55%
9.57%
2013
-0.28% 1.84% 2.54% -0.58% 1.98% 0.21% -0.83% 0.62% -0.03% -0.55% 0.89% -0.37%
5.51%
2014
-3.98%
-3.98%
Period: 31st December 1998 to 31st January 2014, *to 31st December 2013, Source: Bloomberg, FVC Analysis
Note: Period December 1998 to 20th September 2013 refers to back testing data, from 23rd September 2013, real performance of the FVC
Alternative Risk Premia fund.
Performance Report – January 2014
The FVC Alternative Risk Premia Strategy had
a negative performance of -3.98% in January.
The biggest winner was the Merger Arbitrage
Risk Premia Strategy (+0.12%), with the
biggest loser being the Long Term Forward
Rates Risk Premia Strategy (-1.89%).
The month was dominated by negative news
flow from emerging market (EM) economies
and the realization of investors that EM face
external and internal challenges that render
the old export-led model of growth defunct.
This realization was one of the main reasons
for the shift from risky to safe assets in the
second half of the month. The Long Term
Forward Rates Risk Premia Strategy suffered
most from this sudden reallocation due to the
overall short position of government bond
futures which rallied sharply. Despite the
sharp increase in implied equity volatilities,
the sell-off in global equity markets took place
in an orderly fashion - the S&P 500 realized a
volatility of only 12.35% in January.
Nevertheless, the mark to market valuation of
the equity index variance swaps in the Index
Volatility Risk Premia Strategy showed a
significant loss at the end of the month due to
the increase of implied volatilities above
20%. The merger arbitrage risk premia
strategy delivered a positive performance but
also suffered in the second half of the month,
mainly due to the shift from small- and midcap equities to larger cap equities which is
very typical in a risk-off environment.
This month's drop in the NAV is significant but
not unusual. One of the typical characteristics
of some of the alternative risk premia in the
portfolio (for example Volatility Arbitrage,
Merger Arbitrage and Carry) is the negative
skew in the distribution of their returns. Our
investment strategy is designed to take
advantage of these dislocations. At the end of
January, we sold equity volatility and
increased the exposure to the merger
arbitrage risk premia strategy.
For further details or for more information, please contact us at
Future Value Capital LLP
Tel
+44 203 008 7292
Email [email protected]
Important legal disclaimer: This document is exclusively intended for institutional investors. Its
content should not be made available to private investors. The information contained in this
document is for informal purposes only and shall not be construed as constituting a request, an
offer, investment advice or a recommendation to purchase or sell investment funds or any other
security. Any analysis or research used in the preparation of this document is based upon sources
believed to be reliable at the time of publication, but no representation or warranty is given as to
the accuracy or completeness of those sources. Any opinion, estimates or forecast are subject to
change at any time. Past performance is no indication of current or future performance.
This document and all of the information contained in it, including without limitation all text, data,
graphs, charts (collectively, the “Information”) is the property of Future Value Capital LLP. The
Information may not be reproduced or redisseminated in whole or in part without prior written
permission from Future Value Capital LLP.

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