--Robert Murray
Omega Asset Management, the $700 million London fund of funds shop that is an offshoot of a Madrid family office, has rolled out the Turaco Purest Alpha Fund, a portfolio of 25 hedge funds that seeks to be entirely uncorrelated. “It’s doing what every fund of hedge funds should be doing, which is to add value and not just be a random collection of hedge fund investments,” said CIO Pierre-Olivier Masmejean, who has been running the portfolio internally since 2007.
Turaco debuted on July 1 with EUR22 million. A large proportion of launch money has come from Omega’s flagship Laredo Umbrella Fund, which has invested 7% of its assets in the strategy. The first external investor, another family office, is lined up for Aug. 1.
The fund invests in best-of-breed managers and Masmejean described himself as agnostic when it comes to a strategy bias. The portfolio currently holds managers focused on global macro, shipping, high-grade credit, volatility trading, emerging markets and commodity strategies, among others. Masmejean said the main criteria are for a manager to have a proven track record of constant alpha generation, and to be uncorrelated to the markets and each other. For example, while almost half the portfolio is invested with managers that could technically be described as global macro, he has calculated the average strategy correlation between these managers to be just 4%— some are systematic and some are discretionary, while others have an Asia bias or invest via indices.
The fund of funds charges a 1.25% management fee and a 10% performance fee with a high-water mark. There is a EUR250,000 investment minimum and a one-year soft lockup. Masmejean said Turaco could grow to EUR500 million with the current manager roster, and he does not intend to grow the portfolio significantly.
Masmejean hopes the fund will appeal to investors seeking liquidity and a lack of market correlation. In the wake of the financial crisis, “people want to get back to basics,” he observed. He will begin marketing the fund in the autumn and hopes to attract large institutional investors, as well as more family office money.
This article was originally published in Alternative Investment News.