Intalcon Plans UCITS Version of Successful Hedge Fund

This article was first published by Fundview, Tim Habicht on August 30th, 2023 in German language.

Bremen-based fund boutique Intalcon is planning a UCITS version of its offshore hedge fund Intalcon Alpha for Impact Global. This is what Fundview has learned. The hedge fund has been in existence since 2011 and achieved a positive performance of 37 percent in the extremely difficult past year. Intalcon founder and CEO Klaus Wobbe (pictured right) explains in response to an inquiry from Fundview: "After the Family & Friends fund has delivered a very successful track record over more than ten years, Intalcon has been increasingly asked whether this performance could also be offered as a UCITS fund. For this reason, Intalcon and Agathon Capital are planning to launch the UCITS fund."

However, as UCITS funds are known to have a different framework, Wobbe will have to forgo some trading instruments, such as commodity futures. "We will also be much more cautious in terms of leverage, so absolute performance will not be quite as high. In risk-adjusted terms, however, we are again aiming for a very attractive risk-reward ratio for the UCITS fund, with a Sharpe ratio of over 1, and we also expect an average five-year return in the double-digit range," explains Wobbe.

The investment universe of the new fund is global equities with a focus on U.S. large caps, as well as liquid equity index futures. Liquid interest rate futures and money market funds are also used. In addition, Wobbe allocates precious metals such as gold and silver as well as futures on liquid currencies. Investment decisions for buying and selling, position sizing and risk management are made systematically and are based on algorithms that have been tested over many years.

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We focus on what we are very good at - and that is systematic trading of securities based on clearly defined rules.

Klaus A. Wobbe

Diversification for the traditional portfolio

"We focus on what we are very good at - and that is systematic trading of securities based on clearly defined rules. Every single position is bought and sold again according to the specification of the algorithm. Macroeconomic considerations, valuation ratios or discretionary decisions are not part of the decision-making process," says Wobbe, adding, "To get a bit more specific: Our algorithm combines trend-following with mean-reversion elements so that trends can be quickly identified and exploited, while sideways phases exploit additional return opportunities that classic buy-and-hold strategies cannot benefit from."

In equities, Wobbe mainly trades the 50 largest stocks from the S&P 500, but other stocks can end up in the portfolio as long as they have high liquidity and a positive technical starting position. "The exposure is based on the signal situation of the algorithm. The systematic investment strategy reacts very flexibly and quickly to market changes," explains Wobbe.

As a result, the proportion of equities in the portfolio changes very dynamically. On average, the net equity ratio is around 60 to 70 percent. In addition, there are long and short positions in highly liquid stock index and bond futures, each of which is designed to take advantage of short-term return opportunities. "If there are positive trend signals, a long position in precious metals is also added through gold or silver ETCs. Money market instruments are used for the cash position," says Wobbe, who adds: "The main objective - in addition to an above-average return - is a very low correlation to traditional indices. The fund is thus intended to diversify the traditional investment portfolio and significantly improve the risk-return ratio."