Interview with Stéphane Julen, Credit Suisse 

Stéphane Julen is a Director of Credit Suisse Asset Management, based in Zurich. He is a senior portfolio manager within Alternative Funds Solutions (AFS), managing the group’s UCITS funds and portfolios for institutional and private clients. Mr. Julen also serves on the Fundamental Strategies research team covering European Equity Long/Short and Event Driven managers. Since November last year you managed the CS (Lux) Prima Multi-Strategy Fund, a UCITS fund of UCITS hedge funds. What is the fund’s investment strategy?
Stéphane Julen: With the Credit Suisse (Lux) Prima Multi-Strategy Fund we strive to harnesses the investment skills of some of the best alternative fund managers in a single fund structure. Many of our investors utilise the fund as a core allocation to hedge funds or because of its attractive risk return profile, as an alternative to a bond allocation. From the full universe of alternative UCITS managers we select only those that have the potential to deliver strong risk-adjusted returns. We then put these managers through our thorough institutional due diligence process to assess their investment strategy, risk controls and operational standards.
We select 20-25 of these best-in-class managers to form the Prima Multi-Strategy portfolio by taking into account a range of qualitative aspects and each managers’ expected contribution to risk. To do so, we draw upon the combined insight and expertise of our global research team to formulate a unique macro adaptive strategy allocation. The portfolio is diversified across all alternative strategies and rebalanced regularly. The goal is to ensure a stable return stream under all market conditions, with a strong focus on limiting drawdowns. Will the strategy and allocation focus change under your management?
Julen: We have a team of over 50 investment professionals based around the globe that contribute to our investment outlook, manager sourcing and strategy allocations. This process has proved extremely effective over the past 5 years and is demonstrated by the fund’s out-performance of competitors and leading industry benchmarks. We therefore plan to continue with our team-based approach across our entire fund range and endeavour to provide consistency of returns for our investors. The fund, like most funds, had to take a loss in January. Was this due to the fund’s strong Long/Short Equity bias?
Julen: Over the past year we favored Equity Long/Short managers, which make up around 45% of the portfolio. We reduced our exposure to more long biased managers towards the end of 2015, and now have a preference for managers with a low net exposure. European markets are down almost 30% since their highs last year and our bias towards low net managers helped us protect investor capital throughout the period. Some fundamental managers suffered when markets fell regardless of quality and this detracted slightly from performance. However, our diversified portfolio approach proved its benefit, as several managers posted strong results. Notably, we had positive contributions from a CTA manager that followed the trend downwards and one of our global macro managers, who navigated the market turmoil with particular skill. 2016 already proves to be a difficult year for financial markets. What are your expectations going forward and which hedge fund strategies will be most suited to thrive this year?
Julen: We do not expect a massive market drawdown, but are cautious that larger corrections and generally higher volatility can hurt risk-exposed strategies. We remain constructive on long/short equity, with a bias towards low-net and opportunistic strategies that maintain a liquid profile. Europe has provided more interesting Alpha opportunities for managers to exploit and that is something we expect to continue through 2016. The start of the year has hit stocks hard across the board, and we are keen to keep an open dialogue with managers who will be able to take advantage of a fruitful stock picking environment following this period of high volatility. Additionally, we see increased trading opportunities in fixed income as policy divergence remains one of our core themes, showing as increased dispersion within and between markets. Thank you for the interview.