Alma Selwood Market Neutral Credit
Cumulative Performance (%)
Fund Inception 13 April 2018
The performance data shown represents past performance. Past performance is not a guarantee of future results. Current performance may be lower or higher than the performance quoted. The investment return and the principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.
Strategy & Manager
The Fund provides access to a UCITS compliant version of the Selwood Market Neutral Credit Strategy managed by Sofiane Gharred and his team at Selwood Asset Management (“Selwood”). The strategy was launched in September 2015 and trades a single investment strategy focused on liquid credit indices within the investment grade credit space. It implements the strategy by investing in CDX and iTraxx indices, tranches of these, index options and single name CDS.
The goal is to achieve a market neutral portfolio which has a positive carry and positive convexity. The strategy attempts to monetise the dislocation between the actual credit spread of the CDX and iTraxx index and that implied by the CDS of the underlying index components. There has been a persistent difference between these spreads since the indices were launched in 2004, largely due to the indices being used predominantly to hedge credit exposure. The team will buy CDS on the most risky single name credits in order to minimise the risk of default to the portfolio.
In addition to the core strategy supplemental alpha opportunities arise roll yield as the index rolls twice per annum to the new on-the-run series, the strategy will profit from the technical cheapening of the previous on-the-run index; the strategy also utilises derivatives such as options to create a positively convex return profile in order to try to minimise market risk.
Selwood AM LLP was founded by Sofiane Gharred in 2015. Mr Gharred is a pioneer of the synthetic credit derivatives market with 17 years of experience on both the buy side and sell side. He has gathered a team of seasoned professionals dedicated to offer investors access to unique alternative credit investments. Selwood AM LLP aims at generating superior risk-adjusted returns over a broad range of market environments. Investment approach implemented since 2006 and tested through various market cycles.
Prior to founding Selwood AM, Mr Sofiane Gharred was a partner at Chenavari Financial Group. During Mr Gharred’s tenure, he developed and managed the liquid Corporate Credit Strategy, developed the risk management framework for the firm and significantly contributed to Chenavari winning multiple awards over his 7 years at the firm.
Prior to that, Mr Gharred was Managing Director and Global Head of Structured Credit Trading at Credit Agricole CIB. He was responsible for all structured credit proprietary activities with over 20 traders reporting to him. In this capacity, he successfully managed a $200bn delta equivalent correlation book across a variety of credit markets, notably producing positive returns during the correlation crisis in 2005 and the sub-prime crisis in 2007.
Mr Gharred has a strong quantitative background, with an MSc (Hons) in Applied Mathematics in Finance graduating from Ecole Centrale Paris, and a DEA (Hons) in Mathematical modelling in economics from Sorbonne University.
Statistics & Commentary
The performance data shown represents past performance. Past performance is not a guarantee of future results. Current performance may be lower or higher than the performance data quoted. The investment return and the principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
Sector Breakdown as a % of AUM
as a % of AUM
as a % of AUM
as a % of AUM
Investment Manager's Commentaryas of 28/08/2020
Market Review and Outlook
Risk assets had a poor month as credit indices (ex-roll impact) widened and equities sold off on the back of negative virus headlines, absence of further US stimulus and mixed macro data. New case growth escalated across Europe, although hospitalisations did not increase to the same extent. Additional restrictions have been implemented to localised rather than wholesale lockdown. That said travel, leisure and hospitality sectors continue to be badly hit. Vaccine progress continues to be slow with nothing expected to be widely available until well into 2021. US stimulus talks continued with the two sides still far apart. The Democrats voted through a USD2.2trn package, but this is expected to fail in the Republican majority Senate with their figure being closer to USD1trn.
As the presidential election looms, market expectation is that no further stimulus will be available before the vote, despite the Fed actively lobbying given the challenging economic outlook. Macro data continue to be mixed. Flash global PMIs show manufacturing resilient, but services and composites declining in Europe as the impact of the virus’ second wave bites. Brexit talks continued with no deal in sight. The UK/EU relationship was further soured by PM Johnson’s internal market bill that opens up the possibility of the UK reneging on certain aspects of the Withdrawal Agreement, although its passage into law looks challenging.
After an initial rally at the start of the month, October ended in a risk-off mode as virus data and restrictions worsened and the market became jittery in the run up to the US presidential election. CDX IG34 5Y ended the month around 90bps, or back to levels seen in April. COVID-19 trends continued to deteriorate sharply across Europe with ever more draconian restrictions being put in place. France and Germany were in a second national lockdown by month end with the UK to follow in early-November. This had adverse effects on the already troubled travel, leisure, hospitality and (fixed asset) non-food retail sectors. Further US stimulus failed to emerge, with the Democrats pushing for far more extensive aid than the Republican Senate was prepared to support, which weighed on US assets. Brexit talks continued after the EU leaders’ meeting mid-month, but no trade agreement in sight. However, rhetoric between the two sides was marginally more conciliatory, which helped support GBP and UK risk despite the mid-month sovereign downgrade by Moody’s. ECB held rates and policy, but President Lagarde had her “whatever it takes” moment, indicating that further monetary easing would be made available by the December meeting. Macro data were mixed. US retail sales and 3Q GDP beat consensus, but US jobs data fluctuated and UK unemployment rose to 4.5%. Oil fell on the back of lower global demand and increased output from Libya as WTI ended October down ~10% at USD35.79/bbl.
|Effect||Gross Performance contribution|
– We continued to increase the local sensitivity of the portfolio while adding further tail hedges.
– We added out-of-money option hedges, which should give the Fund significant tail protection at limited cost.
Facts & Documents
Fund Domicile: Luxembourg
Fund Type: UCITS SICAV
Fund Launch: 13 April 2018
Base Currency: EUR
Depositary, Administrator, Transfert Agent: RBC Investor Services Bank S.A.
Dealing: Weekly with a 4-day notice
Cut-off time: 3 pm CET
Management Company: Alma Capital Investment Management
Investment Manager: Selwood Asset Management LLP
Countries where the fund is registered:
Austria, Denmark, France, Germany, Ireland, Italy, Luxembourg, Spain, Sweden, Switzerland, Singapore, United Kingdom
ISIN: LU1769347433 Ticker: DBSI3CE LX Launch: 13 Apr 2018
ISIN: LU1769346898 Ticker: DPSI1CE LX Launch: 13 Apr 2018
ISIN: LU1769346625 Ticker: DBSILCG LX Launch: 6 Feb 2019
ISIN: LU1769346971 Ticker: DPSI1CU LX Launch: 13 Apr 2018
ISIN: LU1769347276 Ticker: DBSI2CE LX Launch: 13 Apr 2018
ISIN: LU1769346039 Ticker: DBSR1CE LX Launch: 13 Apr 2018
ISIN: LU1769346112 Ticker: DBSR1CU LX Launch: 13 Apr 2018