Picking the best team
This doesn’t mean, however, that Oberbeck has now lost faith in long/short equity managers, which continue to form an important part of his absolute return portfolio. He remains invested in funds such as JP Morgan Systematic Alpha, that aims to deliver alpha by investing in hedge fund strategies such as event-driven, long/short equity market-neutral, global macro and convertible arbitrage, which combines low beta with steady volatility below 5%.
But it’s not just about picking the best individual players. Building a team with complementary qualities is at least as important. “When constructing a portfolio, it’s key to keep check of how the various funds you select correlate with each other,” says Oberbeck.
An example of a fund that could be complementary to JP Morgan Systematic Alpha, in Oberbeck’s view, is the GAM STAR Merger Arbitrage fund, which was launched last summer.
“We are not invested in this fund now, but it is on our watch list. It seems to be an interesting opportunity with the typical defensive profile we are aiming for. 80-90% of the portfolio should capture the merger arbitrage spread (2-5%), while the remaining 10-20% is aimed at capturing additional alpha and diversification sources such as spin-offs and index reviews.”
