The impressive launch this year of new London-based discretionary global macro and emerging markets manager Amia Capital is in part an illustration of how crisis can create opportunity.
The four founding partners of Amia were all previously senior executives at Brazilian bank BTG Pactual’s high-performing, multi-billion-dollar Global Emerging Markets and Macro (GEMM) flagship hedge fund.
GEMM was one of the most successful and fastest-growing hedge funds for several years from its inception at the end of 2008. Assets had exceeded $6 billion at the peak, the fund had twice won EuroHedge awards and all was going swimmingly until November 2015, when BTG Pactual’s founder Andre Esteves was arrested in Brazil.
Although Esteves subsequently returned to the bank, and the GEMM fund continues to trade, the event sparked a crisis for the hedge fund. Investors ran for the hills, forcing the managers to liquidate billions of dollars of positions over a three-month period from December 2015 to February 2016 – and into distinctly unfavourable and tricky markets.
Two years on from that unfortunate event, a core team from BTG Pactual is up and running with its own operation – which is already running nearly $1 billion of assets, making it one of the largest new launches in Europe for some time.
Amia’s name derives from the first names of the firm’s four co-founders and principals – Antoine Estier (Amia’s CIO and the former CIO of the BTG Pactual GEMM fund), portfolio managers Alex Garrard and Marat Djafarov, and CEO Igor Hordiyevych – who all worked together for several years at BTG Pactual, and before that at UBS.
The four Amia equity partners lead a team of some 20 people on the investment and business management team – of which around 15 formerly worked at BTG Pactual – and the long shared history of the key team members was one of the many strong selling points to investors when setting up their own operation.
Many of Amia’s investors were also investors in the GEMM fund – which speaks volumes for the way in which the team had dealt with the earlier crisis.
Despite the scale of the portfolio downsizing that was required, and the rocky state of the markets into which the forced liquidations were taking place (particularly in relatively illiquid areas like securitised debt or emerging markets credit), the GEMM fund lost only 7% in the three months in which the downsizing happened.
Given that the fund’s annualised return over the seven years from its inception in December 2008 to November 2015 had been almost 18%, the losses to investors were relatively low in comparison with the stellar earlier gains.
And the fact that the potentially crippling losses that the event could have unleashed were contained to such an extent says much about the way in which the fund’s team worked in unison to get through the problem (on both the investment and business management sides), about the trading acumen and market-making skills of the key personnel, and about their relationships with all the various market and fund counterparties at a time of acute stress.Enjoying reading this article? Want to see more?
“We are proud of how BTG Pactual worked together as a team to deal with the problems, and we are very proud of the fact that we gave all the money back to investors at a very difficult time,” says Estier.
“What happened to us was something that was never supposed to happen, and which we never expected to happen. But having been through an experience like that, you learn that anything can happen and that you have to be prepared for anything.”
In September 2016, the Amia founders agreed to part company with BTG and to start talking to investors about their new venture. At the outset Amia said it was aiming to start with initial assets of around $500 million – which seemed a fairly punchy target in the difficult asset-raising environment for new funds of the last few years, albeit for an established and respected team – and to start trading towards the end of the first half of this year.
In the event, those expectations were exceeded. The Amia Capital Macro fund launched at the start of June with assets of some $750 million, with AUM now close to the $1 billion mark – and the initial marketing campaign for the fund is effectively at an end after a highly successful capital-raise.
In return for their early support, investors that subscribed to the initial founder share class have been given the capacity to double their original investment within the first year on the same preferential terms – which could take the fund’s assets towards $2 billion.
Since the founders see the ‘sweet spot’ for Amia as being around $2.5 billion – and they have no intention of growing to the kind of size that GEMM reached – there is already only limited capacity for any would-be new investors, particularly after factoring in the organic asset growth that should come about through performance.
Besides winning the support of a high proportion of their earlier investors from the BTG fund, and in addition to the substantial capital commitments of the firm’s partners and key employees themselves, Amia’s launch was also notable for attracting a major sovereign wealth fund as a day-one investor.
Overall, some 70% of the fund’s client base is represented by institutional investors such as pension funds – which is a reflection not just of the managers’ investment pedigree, but also of the robustness and institutional-grade quality of the firm’s infrastructure and operational set-up from the very start.
“The infrastructure side has been in place right from the start, which is very important,” says CEO Hordiyevych. “When we were just starting up, people would come to see us and it already felt like an established operation. On the business side, we have been set up from the start with an infrastructure that is able to sustain the growth that we foresee for the business.”
On the business side, two of the senior team members reporting to Hordiyevych are COO and chief compliance officer Neil Sadler, who runs all the back office functions, and head of marketing and IR Petia Hall – both of whom previously worked at BTG Pactual – as well as treasurer Neila Sula and operations head Kristers Reinfelds, who are also ex-BTG.
The one senior outsider – who also plays a key interlinking role between the investment team and the operational side of the business – is chief risk officer Ronan Cantwell, who previously spent 13 years at BlueCrest in various risk and portfolio management roles.
Besides being head of rates risk and head of risk for Americas and Asia at BlueCrest, he also spent his last two years as head of the BlueCrest Staff Managed Account Fund (BSMA) – the firm’s partner-only fund – where he was responsible for risk management, portfolio analysis, cash management and operational oversight.
“We wanted someone from outside in that role,” says Hordiyevych. “It’s good to have someone on the risk side with different experience – who thinks differently and who challenges things.”
Although acting alongside the CIO in terms of the overall investment strategy and portfolio positioning and co-chairing the investment committee, the CRO reports directly to the CEO – giving a clear segregation of responsibilities between the senior executive officers that is an important feature of the firm’s institutional-level infrastructure and governance set-up.
As CIO, Estier sits at the heart of a fully discretionary global macro strategy that focuses on multi-asset class opportunities in both developed and emerging markets – leading a team with a long history of applying a disciplined, opportunistic and often contrarian approaching to risk-taking.
The overall investment approach is based on individual risk-takers’ specialisation in their own area of focus – with the multi-asset approach aiming to diversify risk and maximise returns – but also on a collaborative approach based on cross-sharing of intelligence.
A key aspect of the Amia approach is the flexibility to channel expertise and mobilise resources quickly to take advantage of any given situation.
“We allocate capital based on opportunities, so we need to be fast,” says Estier. “Are we a macro fund? Yes, in the sense that we cover developed and emerging markets, and a range of asset classes. But what we are principally delivering is specialisation.”
He adds: “It is very important that all the guys understand the overall portfolio and that everyone works together as a team. Everyone needs to know what the greatest risk is to the firm as a whole, not just to their own book.”
Three of the four co-founders of Amia are portfolio managers/risk-takers. Besides Estier, Garrard is also responsible for EM sovereign credit while Djafarov is in charge of EM corporate credit.
Working alongside Garrard on the EM sovereign credit side is Peter Allem, who was an EM credit portfolio manager for the BTG Pactual GEMM fund – while Neil Callan, the former senior PM for European credit at BTG, heads developed market credit.
DM rates portfolio manager Michael Burgess and cross-asset PM Olivier Chazalon also previously worked on the BTG Pactual team, while Pierre-Antoine Cousin – who manages DM equities and equity derivatives – was previously at BlueCrest, where he was in charge of the market-neutral capital strategy.
The two most recent additions – completing the front-office PM/risk-taker investment team at 10 people – are portfolio managers Bertrand Lavigne and Karsten Filt.
Lavigne, who is joining in December and who specialises in EM rates and FX, was formerly a senior portfolio manager at Finisterre Capital – while Filt joined in late September from Brevan Howard, where he was a portfolio manager, having previously worked at BTG Pactual trading G10 rates.
The amount of time that most members of the Amia team have spent working together is clearly a major feature of the new operation. But alongside that sense of continuity there is also a determination to do things in a different way, helped by some lessons learned.Enjoying reading this article? Want to see more?
“We’ve got 30 years of combined partnership, and partnership is key,” says Estier. “At BTG we had seven years of history and seven years of testing. So we’ve been able to say ‘let’s do whatever we’ve learned to do best, but in a smaller way’.”
Size is critical to the new set-up. Estier and his partners are adamant that the fund will be capped – probably at no more than $2.5 billion – and that it will not grow to anywhere near the scale of the GEMM fund.
“$2.5 billion is what we think is our sweet spot,” says Estier. “At that size you are on the map, but you can still be quick. This fund will be closed at a conservative level – not at $4-5 billion. We don’t want to be that big again.”
Given the success in the fund-raising so far, Amia can afford to be selective about its investors. And the partners are keen to ensure that those supporters who backed the fund early should have the greatest opportunity to share in its success.
“We wanted to make sure that the people that follow and trust you from the start have the opportunity to grow,” says Estier. “From now on it’s all about performance. In this business you should only survive if you deliver. We did that for seven years at BTG, so that gives us confidence that we will do it again.”
So far progress has been respectable in a fairly difficult environment for discretionary macro managers. The Amia Capital Macro Fund was up by around 2.4% as at the end of September after its first four months of trading, with gains coming from both the EM and DM sides.
“We have no targets on returns,” says Estier. “People always dream of the big macro trade. But we don’t believe in the big macro trade. We do small things all the time and we try to be quick and nimble.”
The firm describes its investment strategy and philosophy as targeting selective diversification through specialist strategies focused on four main investment styles – directional, relative value, liquidity and recovery – and using a dynamic capital allocation process that seeks to create a robust, consistent and repeatable investment process.
It adds that the focus on achieving a strong Sharpe ratio is done at the fund level rather than the individual strategy level – and that there “no passive positions”, even for long horizon trades.
Adding new features to build on the successes of previous years is the essence of Amia – and investors have clearly been keen to back a tried-and-tested team that should be even stronger as a result of the unusual and stressful situation that they came through two years ago.
“We enjoyed our time at BTG and we have no regrets. Amia would not exist were it not for that experience,” says Estier. “It has given us an opportunity to do things in our own style. Having been through an event like that, you learn that things can come your way that you can’t control.”