Liongate utilises a disciplined investment process that starts with understanding the effects of macroeconomic changes on hedge fund strategies. Informed by extensive research, our Investment Committee sets the top-down investment strategy each month. Portfolios are then re-allocated to capture market opportunities and avoid emerging risks. As a result of this strategic turnover, Liongate has been able to outperform industry peers with lower correlation to fund of hedge fund indices. We believe that our active re-allocation of capital is a primary source of Liongate’s superior returns and a competitive advantage over our peers.
Asset Allocation by Investment Strategy
(“Top-down” Approach)
The portfolios are managed dynamically, reallocated monthly towards investment strategies which are positioned to perform well in the current macro environment and away from those strategies which are not expected to perform well. It is possible that one or more underlying investment strategies will be totally excluded from the portfolio at any given time if it is believed that it does not lend itself to adequate returns or has become, or is likely to become, asymmetrically biased to the downside. The investment strategy (or strategies) that are believed to offer the largest opportunities will be offered the largest allocations, within pre-defined strategy allocation limits.
Qualitative Analysis, Quantitative Analysis and Operational Due Diligence
The Research Team conduct in-depth qualitative and quantitative analysis of each manager, with a focus on those managers in strategies currently favoured. Further in-depth operational due diligence is conducted on selected managers, independent from the qualitative and quantitative research process.
The members of the Investment Committee are actively involved in the review of managers and are required to meet with all managers prior to investment. The members of the Investment Committee include all three Principals, Randall Dillard (CIO and Co-founder), Jeff Holland (Co-founder), Ben Funk (Head of Research), and the Head of Operational Due Diligence, Blair Hedges.
Portfolio Construction
The portfolio construction process is designed to ensure that the allocations to investment strategies and managers are consistent with the portfolio’s risk and return objectives. The objective of this process is to construct a well-diversified portfolio that minimises common exposures between funds and takes into account the potential effects of an unfavourable or changing market environment using particular stress test assumptions at the fund and portfolio level. Special consideration is given to understanding the aggregate risk exposures in the portfolio, to ensure that portfolio positioning is consistent with the defined top-down view.