The case to make for the Argonaut Absolute Return fund, which is run by the boutique’s founder Barry Norris since inception in 2009, seems an obvious one at first sight. Congruent with Norris’ promise on Argonaut’s website that the fund ‘targets low volatility, not low returns’, it has returned 78.32% over the three years to 30 September 2015. The track record of the fund is complemented by a 3-year Sharpe ratio of 1.97 and a Sortino ratio of 2.33.
“It’s difficult to find someone in the long/short space with a track record like him,” says Vanwittembergh. “Barry’s track record since inception [in 2009] is really hard to match.”
However, just these figures are a worthless reasons to invest in the fund, says Norris himself. Instead, it’s all about what the fund behaves like when its benchmark index (the MSCI Pan Euro Index) is posting negative returns. Since the fund was launched, the index has delivered negative monthly returns on 33 occasions. The Argonaut Absolute Return Fund managed to beat the index net of fees in 30 of those negative months, and generated a positive return in 18 of them. The chart to the right shows the relative performance of the fund versus its benchmark. Norris seems to get better at his job by the month, since relative underperformance has become less likely over time.
Shorting is key
It’s exactly the contribution of the short book to the overall return which Vanwittembergh likes so much. “It’s very important to me that both the long and the short book generate a positive alpha,” he says. And Norris lived up to his previous track record during the market turbulence of August and September. While European equity indices lost significant ground during that period, Norris’s successful short positions ensured the fund generated positive returns in both months.
However, even Norris is not flawless in riding the waves of the financial markets. In the wake of the market volatility mentioned above, he had reduced the net long position of the fund to just 0.7%. This made him miss out on the ensuing equity market rebound. Consequently, the fund is now headed for its first monthly underperformance since April.