For decades, long/short equity strategies have been deployed by institutional investors seeking improved risk-adjusted returns. Today, these strategies are accessible to a wider range of investors thanks to the rise of liquid alternative investments. Recently, we sat down with Raanan Agus, portfolio manager of the GS Global Equity Long Short Portfolio. Raanan and his team currently manage a $5.6bn global opportunistic equity long/short strategy and Raanan explained the opportunities that long/short strategies provide
- You’ve recently launched a daily liquid equity long/short fund, for readers not aware, would you be able to explain why you’ve chosen to do this now?
In 2014 we were approached by an existing investor in our flagship hedge fund about managing a daily liquid separate account for them and decided that we could create a compelling daily liquid strategy based on the liquid investment ideas in our main hedge fund. Given Goldman Sachs Asset Management’s (GSAM) mutual fund expertise and the increasing client demand for daily liquid alternatives, we then decided to also launch a 40 Act compliant mutual fund in the US in September 2014. And, we are now very excited to launch a Ucits portfolio.
- How does this Ucits fund differ from the flagship hedge fund?
The Ucits fund is incredibly similar to the hedge fund: capital is allocated to ideas, as opposed to regions or sectors. All of the highest conviction ideas in the hedge fund are placed in the daily liquid fund as long as they pass the additional liquidity and capacity tests that we apply due to the daily liquid nature of being a Ucits fund. The main difference is that the hedge fund can have some exposure to additional asset classes, such as credit and FX.
On the long side, the team seeks stocks with high quality business models, strong management teams, substantial free cash flow generation while at attractive valuations. On the short side, the team employs tactical market hedges to potentially hedge extreme tail events, sector hedges to potentially reduce market directionality and it selects stocks to potentially reduce unwanted single name risk.
- What marks out GSAM in the increasingly competitive long/short equity space?
Our daily liquid Ucits fund is managed by the same team as our flagship hedge fund with a local presence in the US, Europe and Asia. The investment process is exactly the same as for the main hedge fund. Our global team of more than 50 investment professionals worldwide1[i] seeks attractive equity investment ideas around the globe. In addition, we can leverage what we believe to be the benefits of being part of Goldman Sachs, including access to corporate management teams and the infrastructure of Goldman Sachs. The macroeconomic insights of the senior leaders and Goldman Sachs Asset Management, cutting-edge risk management systems, and the ability to attract investment professionals from different areas of Goldman Sachs also give us a competitive advantage.
- Can you talk briefly about the risk management process?
Sure, the team employs active risk management of the Portfolio with a focus on capital preservation and low correlation to global equity markets. The team actively hedges the portfolio’s positions to manage security specific and sector risk. The manager also dynamically adjusts the Portfolio’s exposure to the broad equity markets, seeking to be less exposed to broader equity market moves. In terms of managing currency exposure, we fully hedge back to USD using FX forwards.
Views and opinions expressed are for informational purposes only and do not constitute a recommendation by GSAM to buy, sell, or hold any security. Views and opinions are current as of the date of this presentation and may be subject to change, they should not be construed as investment advice.
This material is provided at your request for informational purposes only and does not constitute a solicitation in any jurisdiction in which such a solicitation is unlawful or to any person to whom it is unlawful. It only contains selected information with regards to the fund and does not constitute an offer to buy shares in the fund. Prior to an investment, prospective investors should carefully read the latest Key Investor Information Document (KIID) as well as the offering documentation, including but not limited to the fund’s prospectus which contains inter alia a comprehensive disclosure of applicable risks.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk. Past performance does not guarantee future results, which may vary.
[i] Data as of 30 June, 2015