26 Nov 2008 11:47
RNS Announcement
26 November 2008
Factsheet October 2008
Bramdean Alternatives Limited
This Factsheet contains commentary and news for the calendar month ended 31st October 2008, unless otherwise stated.
October Estimated Net Asset Values
Sterling shares: 101.78 pence
U.S. Dollar shares: US$0.9028
Overview
Bramdean Alternatives Limited, (the "Company") is a Guernsey-based Investment Company listed on the London Stock Exchange. The Company invests in a diversified portfolio of private equity funds, hedge funds and other specialty funds.
| KEY FACTS | |
| Market Capitalisation | £101.2 million |
| Manager | Bramdean Asset Management LLP |
| Annual Management Fee | 1.5% |
| Performance fee | 10% subject to an 8% return and a high watermark |
| Company Brokers | JPMorgan Cazenove Cenkos Securities Plc |
| Sterling class share price on 31st October 2008 | 64.50p |
| Sterling class issue price (9th July 2007) | 100.00p |
| Number of Sterling shares in issue | 97,701,842 |
| U.S. Dollar class share price on 31st October 2008 | US$ 0.9350 |
| U.S. Dollar class issue price (9th July 2007) | US$ 1.00 |
| Number of U.S. Dollar shares in issue | 65,988,142 |
| Minimum investment | N/A |
| Dealing | Daily |
| Valuation | Monthly |
| NAV publication | Monthly |
| October Sterling Estimated NAV per share | 101.78 pence |
| October U.S. Dollar Estimated NAV per share | US$ 0.9028 |
| Total common assets | US$225,262,180 |
| Total Estimated Net Asset Value | US$220,245,659 |
| Half-year end | 30th September 2008 |
| Financial year end | 31st March 2009 |
| Company Secretary and Administrator | RBC Offshore Fund Managers Limited |
| Registrar | Capita Registrars (Guernsey) Limited |
| Stock Exchange code (Sterling shares) | BRAL |
| Stock Exchange code (US Dollar shares) | BRAU |
| Sedol code (Sterling shares) | B1XCHB9 |
| Sedol code (US Dollar shares) | B1XCLF1 |
| ISIN code (Sterling shares) | GG00B1XCHB94 |
| ISIN code (US Dollar shares) | GG00B1XCLF11 |
OCTOBER MARKET COMMENTARY
The reprieve that came at the opening of the month with the eventual passing by U.S. Congress of the Troubled Asset Relief Plan (TARP) was short-lived. The financial crisis deepened during October as weak economic data reinforced the consensus that global recession is inevitable. Central Banks were forced to take action in an attempt to calm markets with coordinated interest rate cuts from the Federal Reserve, European Central Bank and Bank of England. The Bank of England's £50 billion banking rescue plan was well-received and emulated by its European peers. But the subsequent rally in financial markets lacked conviction and was soon reversed.
Across continental Europe, sharp falls in employment, business and consumer confidence were reported. In the U.S., the Institute of Supply Management index of manufacturing slid to 43, where 50 signals economic contraction. In the past 30 years, the ISM has only dropped below 45 during recessions.
The oil price came under sustained pressure, opening the month at US$98.53 for the November West Texas Intermediate (WTI) contract and ending the month at US$65.32 for the December WTI contract.
Against a deteriorating global economic outlook, Government bonds rose as investors sought out the safest possible instruments, while corporate bonds sank. Credit spreads widened as fears grew over the solvency of a number of financial institutions and more financial institutions had to be rescued. Central Banks and Government injected capital to stimulate the banking system, but to little avail.
In what was to become the worst month on record for hedge funds, signs of the stress that would gain momentum over the coming weeks saw a number of hedge funds suspend or restrict redemptions and, in some cases, fold without warning. Equity markets around the world fell sharply with the MSCI World Index losing 19% over the month; the FTSE-100 index lost 10.7%; the Eurofirst 300 Index lost 12.7% and the S&P 500 index lost 16.9%.
Sterling was one of the biggest casualties of the month, losing 9.4% to the U.S. Dollar, which closed the month at US$/£1.62.
PORTFOLIO NEWS
General
The underlying unaudited performance in October was +4.65% for the Sterling Share class and
-0.89% for the U.S Dollar Share class, as measured against the revised September 2008 announced as part of the half-yearly financial review. This compares to falls of -5.99% and
-6.30% for the HFRI Fund of Funds Composite Index and Credit Suisse/Tremont Hedge Fund Index.
The discrepancy in performance between the two Share classes is caused by the continued strengthening of the U.S. Dollar, which appreciated by a further 10% against Sterling during October. The Company hedges at the Share class level with the Sterling Share class reducing its hedge ratio, during October, to 35% of its U.S. Dollar and Euro exposure, while the U.S. Dollar Share class hedged, during October, 70% of its Euro and Sterling exposure. The decision to reduce the hedging rate on the Sterling Share class was taken in support of our view that the U.S. Dollar will continue to appreciate at the expense of Sterling.
As a result of our negative view of the outlook for Sterling, Mesirow Financial Currency Management will manage the hedge on the U.S. Dollar and Euro exposure in the Sterling Share class tactically. This may include taking the hedge ratio to zero in the Sterling Share class. Such a tactic would be matched by a 100% hedge ratio being applied to the Sterling and Euro exposure in the U.S. Dollar Share class. The hedge ratio will remain under close scrutiny and this tactical management does not signal any change in the Company's stated hedging policy.
There are 34 holdings in the Company's overall portfolio. During the month, the Company's redemptions from three Funds in the Transitional portfolio became effective: Oak Hill Credit Alpha Offshore Limited, York European Opportunities Unit Trust and York Asian Opportunities Unit were redeemed on 1 October 2008. As a result of these redemptions, there are now four Funds held within the Transitional portfolio: Aarkad plc, Defender Ltd., Kaiser Trading Fund and Renaissance Institutional Futures Fund ("RIFF").
The stand-out performers during October were Evergreen MAC and Arcas MAC 79 Ltd., both held within the Strategic Hedge Funds portfolio. Both reported outstanding, strong performance during what was the worst month yet for hedge funds.
Overall, the Company's hedge fund investments experienced mixed fortunes. In the Transitional portfolio, RIFF struggled while the other three Funds in that portfolio remained in positive territory. In the Strategic Hedge Funds portfolio, the impressive returns from Evergreen and Arcas were supported by robust performance from Paulson Advantage Plus and Kaiser Trading Group Diversified 2X Segregated Portfolio.
At 31 October 2008, the Company held 20% of its total Portfolio in cash. The Investment Manager intends to maintain cash reserves in order to fund draw-downs from the Private Equity and Specialty Funds and also to protect the NAV in these continuing volatile markets.
Private Equity and Specialty
The Company has now made commitments to eighteen underlying Private Equity Funds and underlying Specialty Funds amounting to approximately $222.6 million, taking into account the U.S. Dollar's appreciation over the month. One new commitment of US$5.45 million was made, on 31 October 2008, to Resonant Music I L.P., an innovative music-for-film Fund which provides finance for the music of independently produced feature films and TV series. Resonant Music will seek to provide finance for around 200 film and TV projects, predominantly in the UK and the U.S. over the next four years and is currently completing its first investments.
The total amount that has been drawn-down on the commitments made is approximately
$79.4 million, with approximately $7.6 million of capital having been drawn-down in October. The Company received one distribution during October from Greenpark International Investors III L.P. and has now received total distributions of $2.3 million since inception.
Capital calls were received from eight of the underlying Funds. Revaluations relating to the third quarter 2008 have been received from the managers of some of the Company's Private Equity and Specialty Funds and these have been incorporated into the NAV calculations for either September 2008, as revised, or October 2008, depending on the date on which the valuation updates were received by the Company. Downward valuations are to be expected given the exceptional market environment and it is likely that the Company will receive further fair market valuation write-downs from some of these managers over the coming months.
Transitional Portfolio
The portfolio held four Funds at 31 October 2008 having redeemed from Oak Hill Credit Alpha Fund, York European Opportunities Unit Trust and York Asian Opportunities Unit Trust. As a result of the Company's decision to redeem from the majority of its investments in the Transitional portfolio and to hold the proceeds in cash, the remaining four Fund investments in the Transitional portfolio represent 13.8% of the Company's overall Portfolio as at 31 October 2008.
The Transitional portfolio returned -1.2%, including cash, during October and has returned an unaudited -9.2%, including cash, in the calendar year-to-date compared with -18.5% year-to-date return for the HFRI Fund of Funds Composite Index and -15.5% for the Credit Suisse/Tremont Hedge Fund Index. Since inception, the Transitional portfolio has returned -7.9%.
The portfolio's holdings in Aarkad plc and Defender Ltd. continued to show positive returns. The overall performance was impacted primarily by Renaissance Institutional Futures Fund, which was the only Fund in the Transitional portfolio to report a negative return.
Since the end of October 2008, the Investment Manager has also decided to redeem from both Aarkad plc and RIFF. We feel that Aarkad plc may become exposed to the widespread impact of the sharp decline in the UK property market. In regard to RIFF, we feel that the recent returns have been disappointing and that the Fund has not demonstrated the characteristics we seek from Funds within the Transitional portfolio, which aims to manage the cash that the Company commits to Private Equity and Specialty Funds but has yet to be drawn-down. In the short term, the proceeds, once received, will be held in cash, pending reinvestment in due course.
Strategic Hedge Funds Portfolio
The portfolio posted a loss during the month, but held up well in exceptionally challenging conditions. The portfolio held 13 Funds and returned -1.5% during October 2008 and has returned an unaudited +1.3% in the calendar year-to-date. Since inception, the portfolio has returned an unaudited +10.9%.
As at 31 October 2008, the Company's redemption from its investment in Arcas MAC 79 Ltd. has become effective. Redemption notices have also been submitted to Atticus European Fund Ltd. and to Hard Assets 2X Fund Ltd., both scheduled to become effective 31 December 2008.
The strong performance of the Strategic Hedge Funds portfolio has taken its total share of the Company's Portfolio to just over 38% as at 31 October 2008, against its target allocation of 30%. The Investment Manager has, therefore, determined to reduce the allocation to be in line with its target. This will be achieved primarily through the redemptions from Atticus European Fund Ltd. and Hard Assets 2X Fund Ltd. although some of the other holdings within the Strategic Hedge Funds portfolio will be trimmed in order to control their position sizes.
Portfolio Highlights
Equity Hedged
It was an extremely testing month for equity long/short managers as we witnessed severe declines in most stock markets across the globe. The style posted a slight loss, with our dedicated short seller instrumental in limiting losses as the manager thrived amid sharp falls in US equities. Elsewhere, our U.S.-focused manager posted a small loss. The key positives for the manager were shorts in industrials, while longs in consumer sectors were the largest detractor. Our UK based manager generated gains from its short exposure to the financial sector; however, these were offset by losses incurred as a result of significant declines in resource stocks.
Event Driven
The style generated a gain, thanks to short positioning in both equities and credit. Our distressed manager posted a solid gain in the worst-ever month for credit. The manager profited from basis trades and short positions in European sovereign bonds. It was a mixed month for our special situations managers: one manager posted a strong gain, benefiting from its short credit exposure, while another manager was down as core holdings declined over the month.
Global Macro
The style was down, as our commodities manager was impacted by the widespread declines in commodity prices. Global mining companies began to price-in significant price falls for 2009, while the mid and small-cap space understandably remained under severe pressure. Despite minimal market exposure, shorts were unable to offset losses from long positions. Our global trader enjoyed a slightly positive month with returns being derived from equity trading, whilst some losses were experienced in asset class discretionary and futures & foreign exchange trading.
Managed Futures
A small profit was recorded, as strong gains from a trend-follower were offset by losses from a short-term trader. During the month we saw strong trends in all sectors, which benefited our trend-followers. Short positions in equity indices and long positions in the U.S. Dollar were particularly profitable, especially against Sterling. Our short-term trader was impacted by long positions in global stock futures as equity markets crashed early in the month. In a month, with strong relentless trends, it was difficult for contrarian and mean-reversion strategies to perform.
Relative Value
In an extremely difficult environment, the style posted the largest loss for the month. Our derivative arbitrageur fund was slightly down as the manager did not deploy its strategy during the month and remained mostly in cash. Our multi-strategy manager was down significantly with the majority of losses coming from the manager's convertible bond and credit strategies. The month was an extraordinary one for credit markets, with the relationship between bonds and credit derivatives appearing to break down completely.
Portfolio Highlights
Geographical Allocation
| North America 59.6% |
| Global 21.1% |
| Europe 16.6% |
| Asia & Other 2.7% |
Portfolio Holdings Asset Allocation
| Strategic Hedge Funds 38.3% |
| Cash 20.1% |
| Private Equity 20.0% |
| Transitional 13.8% |
| Specialty 7.8% |
PORTFOLIO HOLDINGS (INVESTED CAPITAL) ON 31 October 2008
| Manager | Type | Portfolio Weighting |
| Cash | Cash | 20.1% |
| Defender Ltd. | Transitional | 5.1% |
| Greenpark International Investors III L.P. | Private Equity | 4.9% |
| D.E. Shaw Oculus International Members Interest | Strategic Hedge Funds | 4.7% |
| Paulson Advantage Plus Ltd. | Strategic Hedge Funds | 4.7% |
| Rye Select Broad Market XL Portfolio Ltd. | Strategic Hedge Funds | 4.4% |
| Alydar Fund Ltd. | Strategic Hedge Funds | 4.3% |
| Aarkad Plc | Transitional | 3.8% |
| Hard Assets 2X Fund Ltd. | Strategic Hedge Funds | 3.7% |
| Lansdowne UK Equity | Strategic Hedge Funds | 3.6% |
| Thomas H. Lee Parallel Fund VI L.P. | Private Equity | 3.6% |
| Oaktree OCM Opportunities Fund VIIb L.P. | Specialty | 3.2% |
| Deephaven Global Multi-Strategy Fund Ltd. | Strategic Hedge Funds | 2.9% |
| Renaissance Institutional Futures Fund International LLC | Transitional | 2.7% |
| King Street Capital Ltd. | Strategic Hedge Funds | 2.6% |
| Coller International Partners V L.P. | Private Equity | 2.5% |
| Kaiser Trading Fund | Transitional | 2.3% |
| Goldman Sachs Capital Partners VI L.P. | Private Equity | 2.2% |
| MatlinPatterson Global Opportunities Partners III L.P. | Specialty | 1.9% |
| Terra Firma Capital Partners III L.P. | Private Equity | 1.8% |
| Kaiser Trading Diversified 2X Segregated Portfolio | Strategic Hedge Funds | 1.8% |
| Kei Ltd. | Strategic Hedge Funds | 1.7% |
| Arcas MAC 79 Ltd. | Strategic Hedge Funds | 1.7% |
| Evergreen MAC Ltd. | Strategic Hedge Funds | 1.5% |
| SVG Strategic Recovery Fund II L.P. | Specialty | 1.3% |
| DFJ Athena | Private Equity | 1.3% |
| Lehman Brothers Venture Partners V L.P. | Private Equity | 1.3% |
| Silver Lake Partners III L.P. | Private Equity | 1.0% |
| AIG Brazil Special Situations II L.P. | Private Equity | 0.8% |
| Atticus European Fund Ltd. | Strategic Hedge Funds | 0.7% |
| Pine Brook Capital Partners L.P. | Specialty | 0.7% |
| HIG Bayside Debt & LBO II Fund L.P. | Specialty | 0.6% |
| Thoma Bravo Fund IX L.P | Private Equity | 0.4% |
| Rho Ventures VI L.P. | Private Equity | 0.3% |
| LimeTree Emerging Beachfront Land Investment Fund II L.P. | Specialty | 0.1% |
This Factsheet has been produced by Bramdean Asset Management LLP, authorised and regulated by the Financial Services Authority. It is aimed solely at shareholders of Bramdean Alternatives Limited and it should not be relied upon by any other person.
Please note that Bramdean Asset Management LLP has obtained information from a wide variety of sources for the content of this Factsheet. Whilst it has made reasonable endeavours to verify such information, this Factsheet should not be used as the exclusive basis of any investment decisions. It relates to a relatively short time period whilst many of the investments of Bramdean Alternatives Ltd are of a long-term nature.
Bramdean Alternatives Limited invests in high risk alternative investment vehicles. It is
aimed at professional or sophisticated investors who intend to hold their investment
for the longer term. If you are not a professional or sophisticated investor you should take independent financial advice in relation to any proposed investment in Bramdean Alternatives Limited.
Please note that up to date information on the Company, including its monthly NAV and share prices, fact sheets, Prospectus and portfolio information can be found at www.bramdeanalternatives.com.
This Factsheet will be available on www.bramdeanalternatives.com in PDF format in due course.
Capita Registrar's helpline is 0871 664 0300 (Calls cost 10 pence per minute plus network extras). For callers outside the UK, please dial: +44 (0)20 8639 3399.
Registered Office: Canada Court, Upland Road, St. Peter Port, Guernsey, GY1 3QE, Channel Islands.
CONTACT DETAILS
Amanda McCrystal, or amccrystal@bramdean.com
Bramdean Asset Management LLP. 35 Park Lane, London W1K 1RB, United Kingdom
T+44 (0)20 7052 9272 F+44 (0)20 7052 9273 W www.bramdean.com