What Makes Us Different
Theta’s competitive edge is based on:
Blend of smaller and more established hedge funds
Theta has a preference for smaller and medium-sized hedge funds (on average with less than US$1 billion AuM) as there is often an inverse relationship between performance and fund size. Also, smaller managers more often have an independent mind and they are more flexible to changing market environments and investment opportunities. This is particularly important for niche players. Finally, smaller hedge fund organisations are more receptive to Theta’s approach to building long-term relationships with the actual portfolio managers or risk takers. Having direct access to the portfolio managers significantly improves the quality of information we receive from our underlying hedge funds.
Bottom-up approach to portfolio construction
Theta does not apply a rigid top-down (tactical) allocation based on relative return expectations across the various hedge fund strategies. Rather, we take a more bottom-up approach where risk parameters on the portfolio level determine the allocation across individual hedge funds. This approach complements our manager selection process, where we aim to identify hedge fund managers with proven superior investment skills through different market environments. In addition, we may identify longer-term investment themes based on opportunities and the dynamics of the hedge fund industry, which go beyond the typical horizon of traditional tactical asset allocation. Our investment horizon for these opportunities tends to be multiple years.
Investment Access
Our moderate size enables access to hedge funds for which others are too big. This advantage is increasingly important as investment capacity with the best hedge funds becomes scarce because successful managers limit their fund size to maintain strong returns. In addition, our frequent communication with senior investment staff aimed at building long-term investment partnerships is well-appreciated by many successful hedge fund managers who try to stay away from the crowd.
Operational excellence
Theta’s managed account clients can get 24/7 access to their own portfolio via a secured login to our web-based fund administration and reporting platform. This provides a level of transparency which very few funds of hedge funds are willing and able to offer their clients. Theta has a dedicated investment professional for due diligence on the operational infrastructure of the hedge funds we invest in. This operational due diligence effort is headed by our Head of Operations & Finance, who has a strong background in forensic accounting and hedge fund administration. To demonstrate our commitment to ethical behaviour and the protection of our clients’ interests, Theta has implemented the CFA Institute’s Asset Manager Code of Professional Conduct.
Innovation
Theta’s corporate culture is entrepreneurial and intellectually stimulative, which supports our drive to continuously improve our investment process and product offering. Our selection process is supported by a sophisticated technological infrastructure, comprising both proprietary and third party tools. For all these systems, Theta was the pioneering fund of hedge funds user in continental Europe. In addition, Theta launched Europe’s first fund of hedge funds dedicated to less-liquid investment strategies, Theta Deep Value Fund, in July 2006.
