1. Mountjoy Capital
Independent Qualitative
Hedge Fund Diagnostics
Rene Levesque
www.mountjoycapital.com

2. Service Offering
 Ongoing HF research, screening and ranking
 Specific searches & benchmarking
 Operational and investment due diligence
 HF portfolio selection & construction

3. Rene Levesque
 Proprietary equity derivatives trader, compliance
officer, middle office, risk manager and operations
 Buy side and sell side experience
 Over 4300 hedge funds interviewed and evaluated since
2004 (over 2000 under the Mountjoy Banner)
 1-person HF research team at 2.4B FoHF covering all
styles and geographies
 Strategic interviewing training by former CIA
operatives

4. WARNING !!!
Not all hedge funds
deploy absolute return strategies.
…and for as long as you (or your consultant) fails to
recognize this, you shall continue to subsidize and
provide a living to those who will ultimately fail you
when a real hedge fund strategy is needed the most.

5. False Perceptions
Not Key Ingredients to Absolute Returns:
 Long and short positions (Jones Model)
 Paired positions
 Market neutrality
 Targeted volatility levels
 Portfolio diversification
…but perhaps key to reducing volatility of returns.

6. False Perceptions
Not Key Ingredients to Absolute Returns:
 Deep due diligence or “private equity” style
research
 Catalyst-driven investing
 Buying on dips and selling on strength
 Distinguishing Alpha from Beta
…but perhaps key to outperform reference benchmark.

7. Key To Absolute Returns
 Dynamic allocation of risk to ideas currently receptive
to the market
 Discipline in liquidating those that are no longer
receptive to the market
 Portfolio construct:
 Net: Aligned/biased to prevailing overall tend/sentiment
 Gross: Sized to prevailing volatility regime

8. Sources & Origin of Absolute
Return Strategies
Disintermediation from bank’s proprietary desk
Hedge Fund Manager = Analyst + PM + RM + Trader +
Entrepreneur + Business Manager
“Back Down The New Haven Line” article

9. What is an Absolute Return Strategy?
 More “trading-oriented” than an investment
strategy
“The market is a collective perception of reality. It will
prove you right or wrong, not the truth !!”
 Trading = disciplined and dynamic calibration of
risk exposures

10. Key Elements of Absolute Returns
 Liquidity
 Effectively navigate between perception and reality
 Nimble/Trading style
 Disciplined & Humble

11. Portfolio Inclusion and Sizing
Investment
 Index constituent & idea generation
 Valuation gap and conviction
Absolute Return
 Idea generation
 Market receptivity/acknowledgment
 Loss tolerance/discipline

12. Portfolio Construction
Investment
 Breadth of idea generation
 Underlying valuation gap and conviction
 Investment policy
Absolute return
 Net: prevailing market direction and sentiment
 Gross: volatility regime

13. Valuation Gap & Conviction
 I like the stock at 100
 I like it more at 90
 I love it at 80
 I “blow-up” at 40 !!!

14. Best Strategies for Absolute Return
 Discretionary Global Macro
 Actively Traded Equity Long Short
 Systematic Global Macro

15. Key Determinants (basic)
Background
Alignment
Process
Idea Generation
Infrastructure
Pulse of Risk & Return Drivers
Unique Features/Competitive Advantages

16. Key Determinants (specific)
Discipline
Catalyst Push
Market Sentiment
Core + Opportunistic Trading
Dynamic Exposure Calibration
Implied Strategy Skew
Liquidity, Liquidity, Liquidity

17. Mountjoy Capital
Rene Levesque
438 402 2022
rene@mountjoycapital.com