Highbridge Multi-Strategy anticipating volatility spikes – Highbridge Multi-Strategy (HMSF), the UK-focused multi-strategy hedge fund, invests across several areas, including, equity, volatility and macroeconomic-based events. The trust today announced its annual results for the year to December 31, 2018, with total return NAV down 2.02% in sterling terms. Although they were disappointed not to deliver a positive number, they provided some degree of capital protection in a challenging year.
For the year, the fund’s equity strategies, such as sector-focused long/short equity detracted the most from performance. The largest contributors to HMSF’s performance included merger arbitrage and capital structure arbitrage.
Expecting volatility
In the investment’s manager’s note accompanying the results, HMSF said: “Looking ahead, we think that markets are likely to remain volatile based on the heightened risks we see globally. We believe corporate earnings pose a greater threat now than this time last year and that political risks globally remain high. Another critical component to our view is how the Federal Reserve will react to macro data and leading indicators. While the US/China trade situation looks close to a positive resolution, we believe it remains a risk factor as there is still uncertainty as to how the negotiations evolve and how long the current tariffs remain in place.
From an investment perspective, we strive to keep the underlying fund’s market beta on the low end of target with the expectation that there will be ongoing bouts of volatility. In many cases, credit has underperformed its underlying equity, which can create dislocation opportunities for our cross asset relative value and convertible credit and capital structure arbitrage strategies and we therefore have increased the weighting of both in our portfolio. Regardless of how the abundance of macro risks on the horizon plays out, it should create opportunities for our relative value strategies. We believe the decisive strategy shifts we made in 2018 enable the fund to take more idiosyncratic risk while managing through periods of heightened volatility.”
HMSF: Highbridge Multi-Strategy anticipating volatility spikes