Fondaco Alternative Absolute Return (FAAR) is a highly concentrated portfolio of hedge strategies characterised by strong alpha generation and limited directionality.
The fund chooses “best – in – class” hedge funds. These hedge funds are often diversified internally into a variety of alternative sub-strategies. This structure is subject to strict risk control and can obtain considerable and stables returns even in very different market contexts, thus enhancing their decorrelation with respect to traditional risk premiums (equity, interest rate, credit).
The vehicle provides favourable liquidity conditions, in relation to the reference field, and it is the result of multiple decision-making aspects: the choice of the best manager (in absolute terms and with reference to specific hedge strategies), dynamic construction of investment portfolios based on qualitative and quantitative considerations, monitoring of individual investments with immediate intervention in relation to negative events.
The managers selected by FAAR always have a clear competitive advantage over their competitors, which can at least be summarized as one of the following:
- Organisational structure (the ability to attract/train many of the best investment talents, but focus on risk management)
- Specialisation (in- depth technical knowledge related to complex investment areas)
- Technology (cognitive and financial superiority in research and development related to technology, technological avant-garde of the top players is now rarely attacked by competitors)
In accordance of the competitive advantages mentioned above, FAAR is powered by performance drivers that are well identified ex-ante, and typically linked to the sustainable generation of alpha: in fact, by choosing to strictly limit the sensitivity relative to the traditional index (beta is always < 0.3), and the added value (“alpha”) created by the hedge manager is derived from one or more of the following characteristics:
- Stock picking (ability to select the best long and short opportunities)
- Strength and avant-garde quantitative models
- More accurate interpretation/forecasting of macroeconomic data
- High degree of specialisation in complex market segments
- Ability to deal with financial situations that offer higher return potential