1. October 2013
1.2%e
An estimate, based on actual results from
2/18 funds and an estimate from 16/18 funds
The Hilltop Decorrelated Fund
Delivering decorrelated returns in a highly correlated environment
The fund enjoyed a strong month in October gaining 1.2%. In July we wrote about the unusual and frustrating phenomena that plagued us in the first half
of the year when month after month the number of losing funds seemed to cancel out the number of winning ones. Our fear was that some would view
this repetitive offsetting of winning and losing positions as inevitable; that a portfolio of non-correlated funds is ‘bound to cancel each other out’. However
intuitive this may seem, it is incorrect: non-correlated investments, by definition, perform independently of each other (and markets). It has been pleasing,
therefore, to see a return to normality over the past 4 months with twice the number of winning to losing positions (a number entirely in line with our
Core Select Fund’s 44 month history). Indeed, during that time, there have been just two instances where we had more losing positions than winning
ones and both of those were down to our much-discussed (and long since disposed) macro exposure.
Monthly perf (%)*
Jan
Feb Mar Apr May
Jun
Jul
Aug Sep
Oct Nov Dec
2013
-0.8
0.3
0.1
0.5
-1.0 -0.2
0.5
-0.3
1.5
1.2
HTDCBC2 TL (USD)
HTDHDFS TL (GBP)
2012
1.3
1.2
1.3
1.2
0.5
1.0
0.8
-0.3
0.3
-0.1 -0.3
2.7
9.7
Target
returns
An average of 10-12% p.a. net of
fees over a three-year period
2011
2.6
0.0
0.7
2.8
2.0
1.2
2.2
-0.4
2.0
0.4
4.2
23.2
* Pro forma results are shaded in grey. Results are shown net of all fees and costs assuming a fund size of $20m excluding any redemption fees.
Expected
volatility
Less than 5%
Correlation
target
A maximum of 0.4 to the MSCI
World Index over any three-year
period and on average closer to
zero
Investment
liquidity
75% of AuM invested in funds with
monthly redemption or better
Leverage
Maximum of 33% long-term and
10% short-term
Target size
$500m
Share class
USD and GBP
GI000A1J6ZB9 (USD)
GI000A1T87X1 (GBP)
Bloomberg:
Risk metrics (Jan 2011 – Oct 2013)
DecorHFR Fund
related HFR FoF Weighted
Fund* Composite Composite
MSCI
World
37.4%
6.7%
7.8% 25.2%
Compound
annual
11.9%
2.3%
2.7%
Annual volatility
4.3%
4.3%
5.4% 14.2%
Fund domicile Gibraltar / Experienced Investor
/ type
Fund
Max drawdown
-1.2%
Minimum
investment
$10k if invested via a life wrapper,
$ equivalent of €50k if advised by
an IFA, €100k if investing directly
Sharpe ratio¥
Fund liquidity
Monthly
Redemption
notice
45 days’ notice
Fees
Initial fee: none
Management fee: 1.75%
Performance fee: 10% above
HWM
with 3% trigger
Redemption fee: 5% reducing
Fund manager Hilltop Fund Management LLP
Auditors
Deloitte, Gibralta
Custodian
Royal Bank of Canada
Administrator Helvetic Fund Administration
Contact
Contact
Cressida St Aubyn, Investor Relations
cressida.staubyn@hilltop.co.uk
-0.1
0.4
73.5% 61.8% 64.7% 55.9%
Portfolio snapshot
0%
-6%
2011
2012
2013
Rolling 24-mth correlation with MSCI
1
0
-1
2013
High correlation
¥ Assumes minimum acceptable return of 3%.
Underlying
fund*
Headline strategy
RDC
Equity derivative arbitrage
ATP
Equity long/short non-directional
SAC
Volatility arbitrage
RAB
Trade finance
CRA
Equity long/short non-directional
FJE
Activist credit
PGD
Equity long/short non-directional
LOP
Long/short convertibles
NNM
Long/short dividend futures
SEK
Activist micro-cap equity
CBK
Volatility arbitrage
TCC
Equity long/short non-directional
IAH
Fixed income arbitrage
TEM
Long/short mortgages
WTH
Long/short commodity
FSP
Relative value commodity
SUT
Long/short commodity equities
COK
Macro volatility
* Codes for internal use only
3.6
6%
Portfolio
weighting
10.4%
9.6%
8.6%
8.3%
8.2%
7.8%
7.6%
6.7%
6.7%
5.5%
5.4%
4.9%
4.4%
3.7%
3.5%
3.3%
2.8%
2.6%
Medium correlation
Low correlation
Portfolio characteristics (Oct 2013)
Asset allocation
Bonds/FI (3%)
Commodities (5%)
Lending (7%)
Mortgages (3%)
Equities (45%)
Credit (12%)
Cash (12%)
Volatility (13%)
Liquidity
Quarterly
(24%)
ed
R
Distribution partner
The Synergy Partnership
+603 2301 0930
info@thesynergypartnership.com
% positive
periods
8.3%
-7.7% -9.0% -20.5%
-0.2
1.7
Historical performance
Total return
2.1
YTD
ng
ISIN:
u ci
Monthly
(76%)
© 2013 Hilltop Fund Management LLP | Regulated and authorised by the Financial Conduct Authority | +44 (0)20 7788 7799 | www.hilltop.co.uk
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2. Investment approach
To achieve its targets Hilltop adopts a multi-manager approach investing
in 12 to 20 underlying hedge fund strategies globally, which we are
convinced can deliver decorrelated returns on a sustainable basis. Our
aim is to select strategies that are decorrelated to market movements and
decorrelated to each other. It is an important feature of our approach that
we are not making any ‘macro calls’ and – with rare exceptions – neither
are the managers we are investing with. This is partly because we do
not believe anyone has an edge in making such calls and partly because
even if they did, they would wish to be highly correlated in a bull market
which runs counter to our ambition of being decorrelated at all times (it
is entirely possible to be up in a bull market without being correlated).
Our preference is for managers pursuing a clearly defined opportunity set
and with the requisite investment skills to exploit it. Whilst, on occasion,
this could include managers operating in unconventional areas the primary
focus is on managers operating in mainstream asset classes (equities, fixed
income, FX and commodities) but in unusual and/or distinctive ways. The
fund will not invest in managers with less than a 2½ year track record.
Disclaimer
This document does not constitute or form part of, and may not be used for the purpose
of, an offer or solicitation to anyone in any jurisdiction in which such offer or solicitation is
not authorised or to any person to whom it is unlawful to make such offer or solicitation.
Shares in the Hilltop Decorrelated Fund (the “Fund”) will not be offered to the general public.
This document may not be distributed in any jurisdiction where it is unlawful to do so. A
subscription for shares in the Fund may only be made in reliance on the private placement
memorandum and relevant supplement of Hilltop Funds PCC Limited by persons who are
eligible to subscribe as set out in such documents.
While the information in this document has been prepared in good faith, no representation
or warranty, express or implied, is or will be made and no responsibility or liability is or
will be accepted by the Fund or Hilltop Fund Management LLP (“Hilltop”) or by any
of their respective members, officers, employees or agents in relation to the accuracy
or completeness of the information contained in this document and any such liability is
expressly disclaimed. In particular, but without prejudice to the generality of the foregoing,
no representation or warranty is given as to the achievement or reasonableness of any future
projections, management estimates, prospects or returns contained in this document. Actual
results may vary from estimates.
Hilltop is not acting for any recipient of this document. Hilltop is not responsible to such a
recipient for providing protections afforded to clients of Hilltop and Hilltop is not advising such
a recipient in respect of investing in Hilltop Funds PCC Limited. Past performance is not a
guide to future performance.
The ‘pro-forma’ results in this document are calculated by the retroactive application
of a model constructed on the basis of the historical data of the intended underlying fund
investments utilised by the Fund at its inception and in the same mix at the launch date of the
Fund. There is no assurance that the Fund will be able to invest in the intended underlying
funds at launch and/or at the level intended. There is also no assurance that the Fund would
have achieved the returns shown prior to August 2012 and the pro-forma returns are shown
for illustrative and informational purposes only and should not be construed as an indicator
of future performance of the Fund or any other fund managed by Hilltop. Pro-forma returns
do not represent actual trading and may not reflect the impact that material economic and
market factors might have had on any decision-making if the portfolio were actually being
managed. The pro-forma returns also assume that the Fund would have been able to
purchase the securities recommended by the model and that the markets were sufficiently
liquid to permit this trading. Hilltop has clients other than the Fund and results across clients
may differ materially.
© 2013 Hilltop Fund Management LLP | Regulated and authorised by the Financial Conduct Authority | +44 (0)20 7788 7799 | www.hilltop.co.uk
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