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H2O MultiBonds, Allegro & Adagio

H2O MultiBonds is H2O flagship fund of H2O Asset Management, is a relatively new fund manager that was setup in August 2010.  However, the fund’s strategy is not new – it is a fund that replicate its proven successful investment strategy with consistency and longevity fund that was set up in 1993 by the key partners of H2O – Bruno Grasters, CEO of H2O and others,  when they were with Credit Agricore, now known as Amundi – probably the largest Asset Management in France.  The year to date performance of H2O MultiBonds in Euro term is about 27%.  It is not a hedge fund but a fund that is in compliance to Undertakings for Collective Investment in transferable securities  (UCITS) IV.

H2O is now 50% owned by Natixis Global Asset Management - probably the 2nd largest Asset Management in France and 50% by H2O’s 10 Partners, which have been working together for 15 years.  The current AUM of H2O is $6.7 bn as of 2014-11-06.  They target to have a total AUM of $12 bn before closing their funds for further new subscriptions.  The fund manager believes that fund size ~$12 bn is an ideal size to be managed effectively.  The previous fund’s size when they were with Amundi was $70bn.

H2O investment strategy is based on Global Multi-Asset:  Currencies, Government bonds, Credit and Equities, active, top-down, diversified and unconstrained with no black box or trading systems. The strategy of their funds may be classified as a Global Macro using relative value, purely judgemental.  Further to that, instead of categorising the team into region or asset type, the team is divided into 3+1 framework:

  1. Macro economics
  2. Liquidity
  3. Valuation
  4. Technical Analysis

They believe: Macro economics, Asset Liquidity and Asset Valuation are the three key components of accessing the position of the market and the Technical Analysis, to supplement the 3 key components.  H2O MultiBonds is designed to outperform JPM GBI Broad + 2%p.a.

Another fund of H2O – H2O Allegro, is a fund meant to deliver a return based on absolute – regardless of the market direction of Euro OverNight Index Average (EONIA) + 4%p.a.

Table below summarized the H2O series of funds extracted from their September factsheet:  Adagio, MultiBonds and Allegro, which were incepted in 2010:

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This is not a fund for man on the street, as it does deploy financial derivatives such as futures, swap, options and etc.  In order to extract additional alpha from the market, the fund is allowed under UCITS framework to leveraged up to 200% to long and short sell securities.  However, it is not a hedge as the fund can be redeemed on daily basis.  Hedge Fund’s redemption is normally carried out on monthly basis.

Last but not least, the company is called H2O because, the founders wish to differentiate themselves from Hedge Funds by providing water (H2O) clear transparency in its investment cost structure.