Skënderbeg builds to launch and beyond
Zurich based Skënderbeg Funds has launched its business recently via a Liechtenstein fund of hedge funds. Co-founders Bruno Schneller and Miranda Ademaj have discussed their objectives.
Skënderbeg Funds AGmvK, an investment fund for qualified investors under Liechtenstein law announced in January that it would launch its fund of hedge funds on 1 February with $10m in seed capital.
The fund is intended to use a long/short equity strategy, invested in a portfolio of 10-15 small to mid-sized managers, which typically get overlooked by larger fund of hedge fund managers.
Bruno Schneller, co-founder and CIO of the investment adviser (pictured above), and his colleague Miranda Ademaj, co-founder and CEO (pictured top), discussed the launch and their approach to selection when attending InvestmentEurope’s most recent event in Zurich.
The co-founders believe that the initial AUM will grow fast, not least because they see other investors in the pipeline, who would be both local and pan-European.
With a pass-portable structure as an alternative investment fund, the fund is seeking to make best use of EU and Swiss solutions.
For this particular fund, Signina Capital (Liechtenstein) AG will act as the investment manager and Skënderbeg Asset Management AG as the investment adviser. Valartis Fund Management (Liechtenstein) AG was nominated as fund administrator, LGT Bank AG as custodian and PricewaterhouseCoopers AG as the fund’s auditor.
“Liechtenstein is growing fast as a location for new managers, and maintains good relations with Switzerland. It is located close to Zurich and is politically stable,” says Ademaj by way of explaining the domiciliation.
Detailing the fund’s long/short equity strategy, Schneller says that it will invest globally, and do so in mind of liquidity.
“Most US funds tend to be illiquid, for example, offering quarterly dealing and redemption notice periods,” Schneller says.
“They often have redemption fees, penalties, or lockups. We don’t like that. We want to be as liquid as possible.”
The fund is aiming for monthly liquidity, to match the underlying funds. Thus the focus is on finding hedge funds with monthly liquidity. A 30-day redemption notice is deemed preferable.
Skënderbeg also takes a particular approach to risk, which is summed up in a couple of statements: “winning by not losing” and “boring is good”.
“We need some risk to make returns, but we don’t want drawdown risks,” notes Ademaj.
Adds Schneller: “There are few good hedge funds. But at the end of day it is up to us to find the hidden gems. Some fulfil our criteria, for example, volatility of 8-10%.”
The fund is focused on small to mid-sized hedge funds. This is a universe that is not so large. Screening can throw up names to contact for further information, and for those that are new to market, Skënderbeg will work with introducers at prime brokers.
“They know the criteria we a looking for, and can come up with ideas,”
“Our niche is to find funds that are below the radar. Research proves that smaller hedge funds tend to perform better. One reason is that larger hedge funds may be impacted differently with regards to incentivisation and business growth. Our focus on smaller funds is a niche that is not covered to the same extent, because larger FoHF will tend to invest in bigger names. Our strategy also facilitates contact with managers and enables us to get full transparency,” Schneller says.
The sweetspot indicated is funds with $50-$500m in AUM, but only established funds with reputable service providers will find their way into the portfolio. The portfolio relies on an approved list of some 30-40 names, with the actual number in the fund of 10-15 names.
This makes it a concentrated portfolio, and means regular access to the managers, helping avoid any surprises.
As this is a new fund of hedge funds, it is likely to start by seeking out investors that are private client/family offices. The lack of a three year record makes it more difficult to consider institutional clients. However, with a record of a year or two it becomes more viable to consider private banks, the co-founders state.