In an attempt to evade the current problems facing the fund-of-hedge-funds sector Absolute Alpha has increased the liquidity buffer of its flagship Alpha Strategic Fund.
The firm decided to raise the fund's cash holdings to between 30 and 40 per cent and move away from illiquid underlying strategies, Absolute Alpha chief executive Shawn Richard said.
"Two quarters ago, we started pulling monies off the table from strategies that we believed may go out of favour or would fall victim to a deteriorating credit and liquidity environment," Richard said.
Alpha Strategic Fund holds around 10 underlying funds, which mainly trade in liquid assets and include stocks and managed futures. The fund's retail component has gained 2.69 per cent for the year to October 31.
"One of the biggest advantages as a boutique manager is our ability to quickly adapt to changing market environments, such as what we have seen in the last 12 months," Richard said.
"The fact that we are sitting between 30 per cent and 40 per cent cash and gravitating towards more liquid and transparent strategies is an example of what a boutique can do."
Funds with a high-weighting to such strategies are in a more liquid position in this environment, Lonsec senior investment analyst of managed funds Deanne Fuller said.
The fund-of-hedge-funds sector has recently come under pressure as managers used available cash to fund currency rolls, following the Australian dollar's October fall.
BT's Global Return Fund, DWS's Strategic Value Fund and HFA's Diversified Investments Fund have not frozen redemptions or applications and continue to operate as normal, spokespeople for the respective funds have said.
Select/Gottex Market Neutral Fund and Goldman Sachs JBWere's Multi-Strategy Funds have frozen redemptions, due to increased withdrawal requests.
