Edmond de Rothschild Prifund Alpha Emerging Market: Banque Privée Edmond de Rothschild

Highly commended: Best performing emerging markets fund of hedge funds

Banque Privée Edmond de Rothschild is considered the father of the fund of hedge funds (FoHF) industry, having launched the first ever FoHF vehicle in 1969. Its assets under management (AUM) in the FoHF business have had plenty of time to grow and recently topped $10 billion for the Edmond de Rothschild Group while the number of dedicated staff in this area has grown to 80.

The company offers a range of FoHF covering all major strategies in the alternative area. Most of these portfolios are highly diversified. This diversification was a substantial advantage during the crisis in 2008. However, one specialised fund, the Prifund Alpha Emerging Market Fund, has also been a staunch performer over recent years, having returned an annualised 9.40% with annualised volatility of 13.40% since opening for investment in April 2004,

The fund seeks to earn positive absolute returns by investing primarily in the world's emerging economies, via funds with alternative as well as long-only strategies and whose assets can include equities, bond or both. It has accrued some $50 million under management. Around 86% of assets are currently invested in instruments in Asia, Latin America and Eastern Europe.

The investment process incorporates two stages, a bottom-up selection process as well as top-down screening. During the bottom-up segment of the selection process, the investment team focuses on the qualitative aspects of the manager. At this stage of portfolio construction, macroeconomic criteria do not come into play.

Selected managers are grouped by pools. Each pool represents an alternative strategy. Allocation sizes to the various pools or strategies are calculated in order to reflect the macroeconomic view of fund managers Alexandre Col and Marc Sbeghen.

The fund has no official benchmarks but uses several indexes to compare performance with its objectives, including the MSCI emerging market free local currency index.

Risk management is a core focus for the fund and is performed at several levels. First, a due diligence process that’s been honed over 40 years is used to select the best managers based on past performance and their capacity to adapt to different market conditions as well as on the quality and sustainability of their respective businesses.

Second, a proprietary, internally developed IT system facilitates analysis of the portfolio by for aspects such as manager weight, strategy weight, liquidity, cash, exposures, etc. A separate risk control team monitors the investment restrictions and the liquidity profile of each underlying position to ensure the managers do not drift from the criteria demanded by the fund.

The Luxemburg-domiciled fund, which charges a management fee of 1.25% plus a performance fee of 5%, requires a minimum investment of €10,000. Redemption is weekly with a notice of one week and there is no lock-in.

Fund facts

Full name of fund: Edmond de Rothschild Prifund Alpha Emerging Markets
Portfolio managers: Alexandre Col and Marc Sbeghen
Name of investment/manager company: Banque Privée Edmond de Rothschild
Launch date: April 28, 2004
Assets under management:  $52 million
Annualised return: 9.40%
Annualised volatility: 13.40%
Strategy: emerging markets long/short
Share classes: A and B with distribution available in US dollar and euro
Administrator: Banque Privée Edmond de Rothschild Europe
Auditor: Deloitte
Custodian: Banque Privée Edmond de Rothschild Europe
Domicile: Luxemburg
Listing: None
Management fee: 1.25%
Performance fee: 5%
Minimum investment:  €10,000
Lock-in/up: None
Redemption period: weekly with one week’s notice