A Russell hedge fund-of-funds which speaks for 3 per cent of both the Russell Growth and Russell Balanced funds commenced winding up with effect from 22 March, following a rush of redemption requests spurred by poor performance.
Russell is understood to be shutting down both versions of its Alternative Strategies Fund (ASF), a hedge fund-of-funds employing external underlying managers across six strategies – market neutral, event-driven, convertible and capital structure arbitrage, fixed income and currency arbitrage and long/short equity. The ASF is understood not to be offered directly in Australia, but sources roughly $400 million via the Balanced and Growth fund allocations. Gavin Pearce, the CIO at Tower Australia which outsources all its multi-manager investment options to Russell, said he was in “;ongoing discussions”; with the implemented consultant about its AFS exposure, and was unable to comment. According to a December 31, 2007 update on the NZ$ version of the ASF II, the fund’s two year return of gross 6.84 per cent was barely half that of its benchmark ($US LIBOR plus 5 per cent hedged to $NZ) and the one year return was worse, 1.33 per cent against the benchmark’s 13.18 per cent. A loss of 3.34 per cent was suffered in the December quarter. By March 26, the Irish-listed ASF II had received redemption requests comprising roughly 68 per cent of its total funds under management, and in a note to investors recommended they submit a full redemption request by April 18 for the May 1 dealing date. Recent culprits in the fund’s underperformance were in the event-driven strategy, which was exposed to a 55 per cent writedown in the SageCrest asset-based lending portfolio, and the fixed income strategy’s exposure to a municipal bond arbitrageur’s losing bets on asset-backed and mortgage-backed securities. Russell was unavailable for comment at presstime as to how it would reallocate any redeemed ASF exposure for its implemented clients. The March 26 shareholder note said “;some shareholders have indicated that, notwithstanding the current level of redemption requests, they wish to maintain their exposure to the underlying hedge funds and would be willing to take an in specie distribution of the assets of the fund and maintain these assets in another fund vehicle to be established.”; Russell said it was considering the structure of such a fund, and also said it would waiver at least some management fees on the ASF for the post-April 1 period.
Future Fund chief investment officer Ben Samild said that FY24 has been a great year for alpha creation, thanks to strong returns in equities and, unusually, across multiple hedge fund strategies all at the same time. He reflected the past few years have been “a difficult time to be an asset owner and to generate positive returns for risk assets” but the Future Fund is tracking well of its long-term mandate.
Simon Hoyle and Darcy SongSeptember 4, 2024
