Independent investment boutique Zadig Gestion is heading back to its hedge fund roots by rebooting its European equity strategy.
The Luxembourg-based firm closed its long/short offering, Zadig fund, run by the founder of the company Laurent Saglio, (pictured right) at the end of 2016, handing £100 million (€117 million) back to investors.
Fund raising is now underway for the replacement strategy called Memnon Market Neutral.
Launched on Wednesday, the Ucits compliant, daily dealing fund is run by Citywire AA-rated Vincent Bourgeois, (pictured left) who joined the firm in 2011 to run the long only Memnon European equity strategy, a high conviction portfolio of around 25 stocks.
Prior to Zadig, Bourgeois was at HSBC for eight years. During that time, he co-founded the HSBC European Alpha funds.
On the launch of the fund, Pierre Philippon, a former Morgan Stanley prop desk convertible bonds analyst, who now heads up business development at Zadig, said: ‘It was time to provide a much more up-to-date, institutionally focused version of the strategy.’
The long book for the market neutral fund is taken from Memnon European Equity, while shorts are a combination of single names and baskets/indices.
The fund targets a neutral exposure to cyclical, defensive, growth and financial themes.
With Memnon European Equity’s track record now nearing seven years, Bourgeois highlights the fund’s very low correlation to the rest of the market.
In the five years to December 2016 it has averaged a tracking error of 5.4% each year, while the correlation of its excess return versus its competition has been around 10%.
He explains: ‘The opportunity to express yourself is getting narrower so you can’t afford to miss your chance. Your portfolio therefore needs to be geared to efficiently express your view. For us this means concentration but with every idea bringing diversification to the portfolio.’
He argues this is even more pertinent considering the post crisis investment climate.
‘A very big driver in the European market in recent years has been low interest rates, companies have been given money for free to play with which has meant the short side has been crowded, but this will change.’
And it’s a change Bourgeois is geared to embrace with the Memnon Market Neutral fund.
‘The debate on hedge funds should not only be “can you perform?” But more importantly; “can you perform differently?” And over more than three to five years, because that’s really not a long time.’
Early bird pricing
Current positioning favours financials and levered companies, with no exposure to capital goods or chemicals as Bourgeois is far from sold on the reflationary trade.
‘We’ve had six years of growth in the US, it wasn’t so long ago that there was talk of a recession and the cycle being extended.’
The firm are offering ‘early bird’ pricing up to 31st January, whereby the management fee will be reduced to 0.85%. This is on top of a performance fee of 15%, with a high water mark.