Picking the best managers of the worst assets seems a contradictory strategy when it comes to running a fund of hedge funds, but Ayaltis favours distressed.
The Swiss manager launched in late 2008 – a timing that suited the firm, as it focuses on funds that invest in undervalued assets in the stressed and distressed credit space.
“When everyone is jumping out of the window and throwing out their jewels, [assets] are at their best true [value],” says Ernesto Prado, the colourful co-founder and chief investment officer of Ayaltis.
He half-jokingly describes Ayaltis as a “deep, deep value” FoHF manager. Its Acantias Offshore Fund invests in strategies such as relative-value fixed income, event-driven, distressed credit, and capital structure arbitrage.
Roughly half of the Acantias portfolio – which is concentrated in six to eight hedge funds at any one time – is now in relative-value credit. It is up 8.5% in the year to end-September, and 27.7% since its inception in March 2010.
Ayaltis also runs Sicav vehicles Areca Value Discovery Fund and Areca Liquid Core Fund. The total AUM across the firm’s three products is $310 million, with an investor base that is concentrated in the family office segment (65%). Institutions account for nearly a quarter of assets.
“Our families hate the private banking sector,” says Prado. “If you don't know how it works, it's terrible. Our families know how the system works – that's why they give us money.”
Asian families – based in and outside the region – comprise 16% of Ayaltis’s family office investment capital, with Europeans making up the rest.
Yet the firm does not yet have assets in the region. While Asia is in good financial shape compared to the West, notes Prado, “it has not developed enough internal market consumption”.
The consumers of Asia-made goods are still largely from Europe, the US and Japan, where market fundamentals are exposed to ongoing economic woes. Prado foresees the European sovereign debt crisis reaching a pinnacle, creating a spill-over effect into Asia.
“We will invest in Asia when Greece brings it to its knees,” he says, “because we’ll only buy Asia on the cheap. There's an entry point for everything.
“Greece is never, ever going to pay [its creditors] back, not in full,” adds Prado, and Spain and France are in a similar predicament. “Asia is going to be correlated.”
Ayaltis does not yet have a presence in the region, but is prepared to launch an office in Hong Kong when its portfolios start gaining Asian exposure. He concedes that a local operation would help the firm better serve Asian family offices, which typically have a shorter history than counterparts in Europe and the US.
“They have only been coming to terms with what it means to have a family office to manage wealth through cycles," says Prado. "They haven’t had to do it so far."
Chinese civilisation has a history dating back more than 6,000 years, he notes, but “that’s not going help you protect your wealth through a capitalistic market".