H2O Asset Management

H2O Volatility Hedge Strategy (Tempo)

Investment Objective

The Strategy aims to outperform the UBS Bank Bill Index. The Strategy can behave in two different ways depending on volatility in the markets.

1) In the event of a market shock (characterised by an increase in volatility), H2O Tempo will attempt to benefit significantly from the increase in volatility.

2) In a period of low volatility (normally characterised by stable markets), H2O Tempo will try to reproduce the performance of cash. The Strategy is managed with a maximum weekly ex-ante VaR of 1.8% NAV at 95% confidence level.

Primary Investments

The Strategy will purchase volatility in equity, fixed income and currency markets. In certain circumstances, the Strategy may also take short positions, in order to take advantage of market opportunities.

Style

Volatility hedge.

Investment Philosophy

The management philosophy for the Strategy is based on the conviction that diversification is a source of stable and robust alpha over time. The management team makes use of constantly updated macroeconomic analysis of the various markets as well as quantitative indicators, which allow them to detect recurring behaviour in volatility.

H2O Tempo's innovation can be attributed to the management team’s extensive experience in managing volatility in equity, fixed income and currency markets.

Process

The manager determines the importance of the directional position of implicit volatility and distributes it across the three asset classes (equities, fixed income and currencies). Structurally, the Strategy will purchase volatility. In certain circumstances the manager has the ability to take a selling position, in order to take advantage of market opportunities. These directional strategies, of which the average horizon is 6 months, are carried out through the most liquid derivative instruments.

To finance the directional strategies on volatility, the management team sets up arbitrage in parallel with an average horizon of one or two months. These are relative bets on the implicit volatility in the equities, fixed income and currencies markets, as well as relative bets on underlying securities in the same markets.

Portfolio Fit

Suitable for investors looking for a strategy to counterbalance the potential losses of a diversified portfolio in the event of shocks to the market.

Currency

Active.

Management Fees

Available upon request.

Vehicle

Mandate.

Investment Manager

H2O Asset Management LLP.

Portfolio Team

The investment team is made up of seven investment professionals; three “architects” – Bruno Crastes, Vincent Chailley and Loic Cadiou, and four “specialists” – Jean-Baptist Roux, Gonzague Legoff, Julio Obeso and Jeremy Touboul. The core members of H2O have an established 17 year track record in global fixed income and global macro multi-strategy management.