Dalton Strategic Partnership launches new European Absolute Return Fund

Dalton Strategic Partnership (DSP), the global investment specialists, will launch the MST European Fund on 1st February 2010 as a sub-fund of the Melchior Selected Trust, a Luxembourg SICAV. The new Fund will aim to deliver positive absolute returns, uncorrelated to equity or bond markets.

 

Managed by Leonard Charlton, a former portfolio manager at GLG and trader at Goldman Sachs, the Fund will follow the same investment approach as his current hedge fund, the Melchior European Fund. Launched in October 2006, that fund achieved a positive return of +8.01% in 2007, +6.26% in 2008 and +4.29% in 2009 which places it in the first quartile of Morningstar’s universe of European equity long/short funds. Since launch, the Melchior European Fund has returned 22.2% compared with a return of -16.6% of the MSCI Pan European Index. This return has been achieved with an annualised volatility of 6.43%, less than one third of the volatility of the MSCI Pan European Index.

 

The MST European Fund marks the first time the long/short investment capabilities of Leonard Charlton will be available to investors in a regulated product. The new Fund will use the full UCITS III powers including leverage and derivatives to replicate the strategy employed by the Melchior European Fund.

 

Commenting on the new Fund, Magnus Spence, Partner at DSP, said: “We believe that the time is right to launch a UCITS-compliant version of the Melchior European Fund. The MST European Fund is an ideal vehicle for those investors looking to invest in a European equity long/short fund via a regulated product, which draws on Leonard’s hedge fund management experience. The new Fund will implement the same strategy as the existing hedge fund which Leonard has managed so successfully over the last 3 years. We do not envisage any changes to the strategy arising from the UCITS structure.

 

Leonard is an outstanding absolute return fund manager who demonstrated his ability to deliver consistent, positive returns in weak market conditions during 2008 when he achieved positive returns in 10 out of 12 months that year. He is also one of the very few hedge fund managers to make a positive return in both 2008 and 2009. He has trading and shorting in his blood.”

 

The MST European Fund combines a fundamental approach to selecting long and short positions, with an active trading overlay. The Fund will comprise 30-60 positions, normally in individual European stocks and will typically operate within a net exposure range of +/- 20%. Gross exposure will normally be between 80%- 150%.

 

“Over the last three years, Leonard has demonstrated his ability to generate alpha from a wide variety of market exposures which are often overlooked by other hedge fund managers. In particular, over the last 3 years, Leonard has achieved almost 1.0% of alpha per month from short positions. As a result, the Melchior European Fund has no correlation with European equity markets or with the EuroHedge’s index of European long/short managers.” explained Spence.

 

Commenting on the new Fund, Leonard Charlton, said: “I am excited to be launching this new UCITS III fund. DSP has proven experience of marketing and managing UCITS funds and I believe that the MST European Fund will be a welcome addition to the existing range of long-only funds offered within the Melchior Selected Trust. 2010 will see a more choppy and challenging market environment which will be well-suited to my flexible style of investing. My approach is ideal for investors who seek positive returns with a low level of volatility.”

 

Concluding, Magnus Spence, said: “Leonard Charlton has an enviable track record of generating positive, uncorrelated returns in the toughest market conditions. The launch of the MST European Fund offers investors access to a regulated fund which has daily dealing and which should deliver positive annual returns whatever the market conditions. In an era of increased economic and market uncertainty, this fund offers a valuable addition to the UCITS III space.”