Kempen Orange Investment Partnership - Class I-GBP (hedged)

Profile

Kempen Orange Investment Partnership (KOIP) is a fund-of-hedge-funds with a diversified exposure to hedge fund strategies. The portfolio typically consists of between 15 and 35 underlying hedge funds. The fund has an unconstrained mandate and can invest in a wide array of strategies, ranging from directional strategies such as long-biased long/short equity to global macro and non-directional arbitrage strategies. The fund can invest in all asset classes and the structure of the fund also allows for investments in less liquid opportunities like distressed debt.

Hedge funds are sourced through an extensive industry network that shares a preference for focused, independent investment managers above the larger traditional asset managers. The concentrated investment approach allows for a thorough due diligence process that is executed by an experienced and specialized team. The members of the investment committee have an average industry experience of over twenty years.

The objective of the fund is to generate a long-term return in excess of Euribor + 4%.

Management team

Michiel Meeuwissen, Remko van der Erf, Igor Puljic, Jeanne Spronck

Performance per 2017-10-31 (rebased)

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Performance per 2017-10-31

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  Fund
1 month 1.2 %
3 months 2.0 %
This year 7.0 %
Since inception (on annual basis) i 7.8 %
De benchmark is the HFRX Global Hedge Fund GBP Index. Performance is shown after deduction of ongoing charges. The value of your investments may fluctuate. Past performance provides no guarantee for the future.
More information can be found on the documents page of this fund

Key figures

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Total fund size
EUR 418.09 M 2017-10-31
Number of shares
870,931 2017-10-31
Net Asset Value i
GBP 111.88 2017-10-31
Kempen Orange Investment Partnership (the Sub-Fund) is a sub-fund of Kempen Alternative Investment Fund Sicav (the “Fund”), domiciled in Luxembourg. Kempen Capital Management N.V. (KCM) is the management company of the Fund. KCM is authorised as a management company and regulated by The Netherlands Authority for the Financial Markets. The Sub-Fund is registered under the license of the Fund at the The Netherlands Authority for the Financial Markets.

The information in this document provides insufficient information for an investment decision. Please read the Key Investor Document and the prospectus. These documents of the Fund are available on the website of KCM (www.kempen.com/investmentfunds). The Subfonds is registered for offering in a limited number of countries. The countries where the subfund is registered can be found on the website. The value of your investment may fluctuate. Past performance provides no guarantee for the future.

Market developments per 2017-09-30

Global equity markets generated a return of circa 4% in Q3-2017, in local currencies. Regionally, Emerging Markets were strongest while European equity markets lagged the rest of the world. As the USD continued to decline versus the EUR, global equities were up only 1% when measured in EUR. Sticking to developed market currencies, GBP initially continued its decline against EUR, from 1.13 to 1.08, but following hawkish rhetoric of the Bank of England the trend reversed and GBP closed the quarter at 1.13 again. Developed market interest rates saw a slight increase with the 10-year German rate going from 0.38% to 0.48% (after peaking at 0.60% in early July) and the 10-year US rate increasing only modestly from 2.27% to 2.31%. Corporate credit spreads continued their decline helping this category to eke out a modestly positive return despite rising rates. Finally, many commodity markets witnessed rising prices with oil (as measured by WTI per barrel) increasing from $46 to $52 and copper prices moving up 10%.

In this environment, Macro / Systematic, Structured Credit and EM-focused Equity-related managers performed best. Two of this quarter’s top-3 contributors (discussed in next chapter) are Macro managers causing this strategy to perform best (+3.5%, contributing +67bps). Structured Credit managers continued their winning streak (+2.7%, contributing +48bps), posting 19 consecutive months of positive performance. Gains were broad-based and although Structured Credit spreads have tightened over the past few years, they are still at much wider levels than similarly rated corporate credit, while the underlying fundamentals are strong. There was dispersion within the group of Equity-related managers, with very strong performance of the Asian Long / Short Equity managers driving the positive overall return (+1.6%, +26bps). Credit / Distressed managers generated a solid return (+1.7%, +21bps), driven by a wide variety of situations including restructurings and post-reorganization equities.

More information can be found in the Investment Letter on the documents page of this fund.

Portfolio developments per 2017-09-30

On the individual manager level 18 out of 22 core holdings (excluding holdings < 1%) contributed positively with the top-3 managers being:
1. Pharo Gaia (+7.3%, contributing +0.45%). This EM-focused Global Macro manager generated gains in (quasi)-sovereign credit and EM rates. Within (quasi-)sovereign credit, key winners were Argentina, Portugal and Petrobras. Within EM rates, Brazil was the gift that keeps on giving.
2. Flowering Tree (+8.4%, contributing +0.31%). This Asian Long / Short Equity manager combined stellar returns in the long book with a short book that detracted only modestly. Among the key long winners were Asian casino’s (Macau and Philippines), Financials in India, and internet/eCommerce.
3. DE Shaw Oculus (+7.9%, contributing +0.24%). This multi-strategy manager with a focus on Macro generated gains across its Discretionary Macro and its Quant Equity book. In the Macro book, gains came from Commodities and Equities (short Oil majors amongst others). Within the Quant Equity book, long-term US forecasts were strongest, but money was made across regions as well as types of models.

There were two modest detractors:
1. Nokota (-1.6%, detracting -0.13%). This mid cap focused event driven manager with a value tilt went through a rollercoaster in Q3-17 with a very weak August followed by a very strong recovery in September. On balance, although most of August’ losses were recovered, a mark-to-market loss on one of its value investments in the Energy space remained.
2. Tybourne (-1.9%, detracting -0.08%). Positive performance of this global Long / Short Equity manager’s long book was offset by negative contribution of the short book. Shorts that hurt fell into two categories; structurally challenged businesses (‘melting ice cubes’) that reported quarterly numbers that weren’t as bad as anticipated, and Chinese companies that rallied to extremely high valuations on leverage and speculation. In both cases, Tybourne stuck to these shorts as based on their re-underwriting they expect the first group to continue the long-term decline and the latter group to ultimately be worth near zero.

WHEN THE STORM IS OVER …
From 2008 through 2014, KOIP was invested in an Insurance Linked Securities (ILS) manager. In a 2014 Investment Letter we explained why we had decided to redeem this investment, highlighting that “due to benign loss activity over recent years and a global chase for yields, expected returns on insurance-linked securities have been pushed down to a level where we believe it no longer compensates for the risks (of insured disasters)”. In the ensuing two years, insured catastrophe losses continued to come in at modest levels, but 2017 is a very different year. Hurricanes Harvey (August, Texas), Irma (August, Florida), and Maria (September, Puerto Rico) have been a devastating humanitarian disaster first and foremost. But these hurricanes are also among the top-10 costliest insured events over the past 47 years (adjusted for inflation) and collectively they are expected to contribute to about $100 billion in industry insured losses. With that, 2017 looks set to become a year where the average ILS manager is confronted with a loss that evaporates 2015-2016 returns.

We are always looking to source attractive alternative sources of return through investments in non-traditional strategies. Examples of such strategies are Distressed Debt, Structured Credit, Merger Arbitrage, and ILS. Often, the best opportunities arise after a period of stress causing the supply-demand dynamics to shift materially in favour of investors. By way of example, the Great Financial Crisis caused a wave of defaults leading to significant opportunities for Distressed Debt. Similarly, selling pressure from European banks and Maiden Lane in 2011 led to attractive opportunities for Structured Credit. More recently during 2015, Merger Arbitrage became an interesting opportunity because M&A deal volumes reached record highs whilst there was only limited capital available to arbitrage away pricing inefficiencies. Capital was limited due to the regulatory environment and many event driven managers being caught up in a few large deal breaks (e.g. AbbVie/Shire).

Now, record insured catastrophe losses naturally raise the question whether ILS might become an interesting investment opportunity again? First indications are that this might be the case, but this is not a given yet. On the one hand losses are significant and on top of that a lot of ILS capital is “trapped” until pending claims are settled. This causes up to 25% of ILS capital to be unavailable to provide reinsurance during the January renewal season. On the other hand, (i) these losses - despite large - fall well within modelled expectations, i.e. these are not tail events, (ii) (re)insurance companies went into this hurricane season with record high capital allowing them to absorb losses, and (iii) there is said to be significant capital waiting on the side-lines and ready to step in should pricing improve. It is too early to tell, but in any case we are stepping up our analysis and due diligence on the ILS space, including on-site visits with all key players in this market during October, in order to determine whether we should re-enter this strategy.

At the end of the quarter, we redeemed the investment in DE Shaw Oculus. This multi-strategy fund has always had a large allocation to a discretionary macro strategy (roughly half of the portfolio over the lifetime of our investment) and a growing allocation to an equity market neutral strategy (one quarter of the portfolio currently). On the former, it is our view that it has more recently lacked differentiation and uniqueness vis-à-vis the other Macro managers in the portfolio. On the latter, we believe that Oculus is not the optimal expression of DE Shaw’s unique skillset when it comes to quant equity market neutral as this fund is not exposed to all facets of that strategy. That being said, we are grateful for DE Shaw Oculus’ attractive risk-adjusted return over the lifetime of this 7.5 year investment, generating an annualized net return of +8.6% (in USD) with a correlation of 0.25 to global equity markets. Per October 1st 2017 KOIP was invested in 20 core holdings (excluding holdings < 1%).

The look-through net equity exposure remained stable at 25%. Note that half of that look-through net equity exposure comes from non-Equity-related managers, such as Macro / Systematic and Credit / Distressed. The look-through net corporate credit exposure increased from 4% to 6%.

More information can be found in the Investment Letter on the documents page of this fund.

The performances and contribution mentioned are those of Kempen Orange Investment Partnership Class C.

Kempen Orange Investment Partnership (the Sub-Fund) is a sub-fund of Kempen Alternative Investment Fund Sicav (the “Fund”), domiciled in Luxembourg. Kempen Capital Management N.V. (KCM) is the management company of the Fund. KCM is authorised as a management company and regulated by The Netherlands Authority for the Financial Markets. The Sub-Fund is registered under the license of the Fund at the The Netherlands Authority for the Financial Markets.

The information in this document provides insufficient information for an investment decision. Please read the Key Investor Document and the prospectus. These documents of the Fund are available on the website of KCM (www.kempen.com/investmentfunds). The Subfonds is registered for offering in a limited number of countries. The countries where the subfund is registered can be found on the website. The value of your investment may fluctuate. Past performance provides no guarantee for the future.

Performance per 2017-10-31 (rebased)

No chart data available

Performance per 2017-10-31

Slide to see more
  Fund
1 month 1.2 %
3 months 2.0 %
This year 7.0 %
Since inception (on annual basis) i 7.8 %
De benchmark is the HFRX Global Hedge Fund GBP Index. Performance is shown after deduction of ongoing charges. The value of your investments may fluctuate. Past performance provides no guarantee for the future.

Dividends

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Distributing
No

Risk analysis (ex post) per 2017-10-31

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  Since inception
Maximum drawdown i -8.52 %
Kempen Orange Investment Partnership (the Sub-Fund) is a sub-fund of Kempen Alternative Investment Fund Sicav (the “Fund”), domiciled in Luxembourg. Kempen Capital Management N.V. (KCM) is the management company of the Fund. KCM is authorised as a management company and regulated by The Netherlands Authority for the Financial Markets. The Sub-Fund is registered under the license of the Fund at the The Netherlands Authority for the Financial Markets.

The information in this document provides insufficient information for an investment decision. Please read the Key Investor Document and the prospectus. These documents of the Fund are available on the website of KCM (www.kempen.com/investmentfunds). The Subfonds is registered for offering in a limited number of countries. The countries where the subfund is registered can be found on the website. The value of your investment may fluctuate. Past performance provides no guarantee for the future.

More information can be found in the the document Facts and Figures on the Documents page of this fund.

Kempen Orange Investment Partnership (the Sub-Fund) is a sub-fund of Kempen Alternative Investment Fund Sicav (the “Fund”), domiciled in Luxembourg. Kempen Capital Management N.V. (KCM) is the management company of the Fund. KCM is authorised as a management company and regulated by The Netherlands Authority for the Financial Markets. The Sub-Fund is registered under the license of the Fund at the The Netherlands Authority for the Financial Markets.

The information in this document provides insufficient information for an investment decision. Please read the Key Investor Document and the prospectus. These documents of the Fund are available on the website of KCM (www.kempen.com/investmentfunds). The Subfonds is registered for offering in a limited number of countries. The countries where the subfund is registered can be found on the website. The value of your investment may fluctuate. Past performance provides no guarantee for the future.

Ongoing charges

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Management fee i
0.75 %
Service fee i
0.08 %
Taxe d'abonnement i
0.01 %
Indirect costs i
1,79% (estimate excl. possible performance fees)
Expected ongoing charges i
2.76 %
Ongoing charges last financial year i
2.63 %

Other costs

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Entry fee
0,00 %
Exit fee
0,50 %
Kempen Orange Investment Partnership (the Sub-Fund) is a sub-fund of Kempen Alternative Investment Fund Sicav (the “Fund”), domiciled in Luxembourg. Kempen Capital Management N.V. (KCM) is the management company of the Fund. KCM is authorised as a management company and regulated by The Netherlands Authority for the Financial Markets. The Sub-Fund is registered under the license of the Fund at the The Netherlands Authority for the Financial Markets.

The information in this document provides insufficient information for an investment decision. Please read the Key Investor Document and the prospectus. These documents of the Fund are available on the website of KCM (www.kempen.com/investmentfunds). The Subfonds is registered for offering in a limited number of countries. The countries where the subfund is registered can be found on the website. The value of your investment may fluctuate. Past performance provides no guarantee for the future.

Share class details

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Share class
I-GBP (hedged)
Investor type
Institutional
Distributing
No
Objective
In excess of Euribor plus 4% on an annual basis
Investment category
Hedge Fund Solutions
Universum
Global multi assets
Inception date
2016-05-02
Domicile
Luxembourg
May be offered to all investors in
The Netherlands
May be offered to professional investors only in
Luxembourg, United Kingdom
UCITS status i
No
Status
Open-end i
Base currency
EUR
Share class currency
GBP
Management company
Kempen Capital Management N.V.
Custodian
J.P. Morgan Bank Luxembourg S.A.

Tradability

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Minimum subscription
Initial subscription: £1,000,000, additional subscriptions: £10,000
Listed
no
Pricing frequency
Subscriptions monthly on the first business day, redemptions quarterly, on the first business day of January, April, July and October
ISIN i
LU1397133460
Entry period purchase order
In order to be executed, orders must be received by J.P. Morgan Bank Luxembourg S.A. 5 business days before the dealing day. Your distributor may use longer entry periods.
Entry period sell order
In order to be executed, orders must be received by J.P. Morgan Bank Luxembourg S.A. 90 calendar days before the dealing day. Your distributor may use longer entry periods.
Details
Settlement for subcriptions is due 5 business days before the applicable dealing day. Settlement for redemption will normally take place within 19 business days after the applicable dealing day.
Kempen Orange Investment Partnership (the Sub-Fund) is a sub-fund of Kempen Alternative Investment Fund Sicav (the “Fund”), domiciled in Luxembourg. Kempen Capital Management N.V. (KCM) is the management company of the Fund. KCM is authorised as a management company and regulated by The Netherlands Authority for the Financial Markets. The Sub-Fund is registered under the license of the Fund at the The Netherlands Authority for the Financial Markets.

The information in this document provides insufficient information for an investment decision. Please read the Key Investor Document and the prospectus. These documents of the Fund are available on the website of KCM (www.kempen.com/investmentfunds). The Subfonds is registered for offering in a limited number of countries. The countries where the subfund is registered can be found on the website. The value of your investment may fluctuate. Past performance provides no guarantee for the future.
Kempen Orange Investment Partnership (the Sub-Fund) is a sub-fund of Kempen Alternative Investment Fund Sicav (the “Fund”), domiciled in Luxembourg. Kempen Capital Management N.V. (KCM) is the management company of the Fund. KCM is authorised as a management company and regulated by The Netherlands Authority for the Financial Markets. The Sub-Fund is registered under the license of the Fund at the The Netherlands Authority for the Financial Markets.

The information in this document provides insufficient information for an investment decision. Please read the Key Investor Document and the prospectus. These documents of the Fund are available on the website of KCM (www.kempen.com/investmentfunds). The Subfonds is registered for offering in a limited number of countries. The countries where the subfund is registered can be found on the website. The value of your investment may fluctuate. Past performance provides no guarantee for the future.

KCM Vision

Kempen Capital Management is an asset manager with a long-term investment approach. We strongly believe in engaged shareholdership that benefits all stakeholders. As a long-term responsible investor, we firmly believe that active ownership and shareholder engagement contribute to positive change across the board.

Our KCM wide approach to responsible investment

To put our vision into action we engage with our investment targets on a wide array of strategic, financial, environmental, social and governance (ESG) topics. Our long-term investment worldview paired with thorough analysis and an experienced and diverse ESG team allow us to use both voting and engagement as means to consistently encourage positive change. Through this process of constructive engagement, we are able to contribute to the development of principles and standards of corporate responsibility within companies.

Fund approach to Responsible Investment

  • As we invest in hedge funds, we don't actively choose to invest in a certain company.
  • During our thorough due diligence process we ask managers what efforts they make regarding responsible investing.
  • Also, we check on as annual basis whether our funds have any exposure to the companies on our exclusion list.
  • We hope that by continuing to ask our managers about their ESG and RI policy, they will start considering formulating an RI policy especially if faced with similar queries from other investors.
  • When a manager is or becomes a signatory or informs us about a RI policy they are using, we open a dialogue to discuss the topic and find out what drove them to their current RI stance.
Kempen Orange Investment Partnership (the Sub-Fund) is a sub-fund of Kempen Alternative Investment Fund Sicav (the “Fund”), domiciled in Luxembourg. Kempen Capital Management N.V. (KCM) is the management company of the Fund. KCM is authorised as a management company and regulated by The Netherlands Authority for the Financial Markets. The Sub-Fund is registered under the license of the Fund at the The Netherlands Authority for the Financial Markets.

The information in this document provides insufficient information for an investment decision. Please read the Key Investor Document and the prospectus. These documents of the Fund are available on the website of KCM (www.kempen.com/investmentfunds). The Subfonds is registered for offering in a limited number of countries. The countries where the subfund is registered can be found on the website. The value of your investment may fluctuate. Past performance provides no guarantee for the future.