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ACP Financials fund beats benchmark by 65 per cent in first six months

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The ACP Financial Opportunities Fund has beaten its benchmark by over 65 per cent in its first six months, according to its manager ACP Partners.

The ACP Financial Opportunities Fund has beaten its benchmark by over 65 per cent in its first six months, according to its manager ACP Partners.

Since launch on 1 September 2008 through 28 February 2009, the fund, which invests across a group of portfolio managers focused on the financial sector, returned 4.9 per cent.

Its benchmark, the S&P 1200 Global Financials, returned -60.7 per cent over the same period, and the HFRI Equity Hedge Index -22.2 per cent.

Managed by ACP Partners, which is soon to merge with TriAlpha Investment Advisors, the ACP Financial Opportunities Fund invests predominantly in long/short equity strategies.

Stephen Greene, partner and chief investment officer of the firm’s multi manager business at ACP Partners, says: ‘Financials account for around 20 per cent of global equity market capitalisation and, despite benefiting from significant diversification, the financial sector as a whole exhibits a high degree of complexity and is under-covered by specialist investors. Having undergone an unprecedented shock, resulting in severe price dislocations, such conditions are ideal for sector specialist hedge fund managers to add value.’

Greene says the portfolio was specifically structured to benefit from the expected market volatility as the firm placed significant emphasis on sourcing managers with trading orientated approaches, ‘macro-aware’ processes and short term catalysts for value realisation.

‘Whilst we feel that the coordinated efforts of governments and central banks globally have resulted in a dramatic reduction in systemic risk, the continuing credit crisis has led to wide dispersions in company valuations that bear little reflection of true underlying fundamentals,’ Greene adds.

The portfolio currently shorts banks that lack balance sheet integrity and takes a long position on banks that have been through the exercise of write-downs and capital raises.

The underlying managers also hold long positions in property and casualty insurers and reinsurers, who have strong balances sheets and will benefit from a firming of insurance premiums and decreased competition.

Conversely, they have taken short positions in life insurance companies whose shorter term liabilities now far outweigh their available liquid assets. Several of the managers have been shorting consumer sensitive sectors, such as credit cards and consumer finance.

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