Annual dividend from hedge fund Altin puts it on 9% yield

Hedge funds may been known for seeking capital gains from their holdings, but the listed Altin multi-manager product has announced a dividend for last year representing a yield of 9.3%.

It also announced having made a redemption from John Paulson’s Paulson Advantage Plus, a flagship product from one of industry’s largest names, which lost 51% last year, according to Bloomberg.

As investors hunt for yield, hedge funds are seeking to make themselves more attractive.

Altin announced in November that its board would propose additional distributions if performance in the previous financial year was more than 4% of NAV, and such distributions would be 20% of the excess performance.

If Altin has a negative or sub-4% performance, the board can decide whether such negative performance must be made up in future years, according to the policy.

Altin’s 2011 distribution of CHF 4.10 per share will be made out of share premium reserves. It equates to 7% of NAV but, because Altin’s shares trade at a discount to NAV, the yield for equity holders, based on the closing price at the end of last year, is even higher.

Altin’s investments in hedge funds fell by 7.52% last year, milder than global shares’ 10.1% loss. The fund of hedge funds jumped 4.53% in the first quarter, compared to 10.9% from global shares.

A recent report from Deutsche Bank’s prime broking unit said the median performance from hedge funds last quarter was 3.42%, with equity strategies
“continuing to lead the pack, with emerging markets posting the strongest
first quarter gains.”

Altin avoided the full extent of stock market falls last year partly by reducing leverage by 9% to 17%, and also by adding 11 new investment strategies, which it said “contributed to reducing the beta of equities in the portfolio”. It has exposure to more than 35 hedge funds.

It is also biased towards more liquid strategies, with most investments offering redemption frequencies of 3 months or less.

Altin also has a policy of disclosure that is surprising, even for the increasingly transparent hedge fund industry.

As at 1 April it was most exposed to macro strategies (24.3%) in funds including Clive Fund, Blenheim Global Markets, Banyan Capital and Comac Global Macro
Its equities fund exposure comes to 29.6%, made up of the Firebird Global long-biased fund, ALP Offshore Utility market-neutral fund, and six long/short portfolios including Arrow Offshore, BlackRock UK Emerging Companies Holding, Coatue Offshore and Scopus funds.

Multi-strategy funds were the third most popular group, comprising 16.5% of Altin and names such as Brevan Howard, Millennium International and QVT Overseas.

It had 8.5% in credit, 5% in convertible bond strategies, 2.07% in managed futures strategies, 5.51% in what it called ‘protection strategies’ and 4.8% in interest rate strategies. Some 3.3% was in event-driven, and 0.6% in private equity.


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