TriAlpha takes short view with bond fund

TriAlpha Investment has launched a corporate bond fund.

TriAlpha Investment has launched a corporate bond fund.

The ACP TriAlpha Global Credit vehicle, managed by Steven O’Hanlon, is run on an absolute return basis with an emphasis on capital preservation.

The Jersey-domiciled fund is expected to have $80m (£58m)-$100m under management at the time of its launch. The group says it aims to build on the success of its International Bond Fund.

O’Hanlon says that he aims to maximise risk-adjusted returns by allocating across the credit spectrum, depending on the investment cycle.

“We are looking to generate a 6% to 8% return throughout the cycle. On average, 75% will be core positions of 25-35 different names. And 15% will be a tactical allocation made of 10-15 different names,” he says. The remaining percentage is held in cash.

O’Hanlon says he takes a top-down approach to identify core sectors to allocate capital. At launch, 20.69% of holdings is in telecommunications, and 22.6% in consumer staples.
The fund targets an annual volatility of less than 4%. It is non-benchmarked, and the overall rating will always be investment grade.

“The average duration of the fund will be around three to five years. That is a shorter duration than a traditional credit fund,” O’Hanlon says.

“The current economic environment suggests very defensive and non-cyclical holdings. [And] we are trying to generate alpha through credit rather than duration.

“With such low average inflation rates, we hope to protect our clients against future inflation,” he says. But he adds that the economic situation is difficult to predict.

“We expect consumer price inflation to pick up again late in the year 2010 or early in 2011. But there is a dramatic asset price deflation that will continue.” He says that most investment products are under pressure, and will remain so.

O’Hanlon expects an overall annual turnover in the fund of about 150-175% each year.

TriAlpha, the asset management arm of the Stonehage Group, will soon merge with ACP Partners to form ACPTriAlpha, which will have funds under management of approximately $2.5 billion.