S&P Rate Maitland's Constantia Hedge Funds

Professional services firm Maitland has announced that three of its funds of hedge funds have been awarded a "AA" rating by global ratings agency Standard & Poor's (S&P).

According to director Jaco Jansen, around 60 funds of hedge funds worldwide had been rated by S&P at the end of March 2007.  Eligibility for ratings is limited to the top 20 percent of funds in their class on a three-year, risk-adjusted basis. Of the rated funds, fewer than 10 percent were awarded "AAA" ratings, 40 percent achieved "AA" ratings and the balance "A" or no rating. 

Jansen says: "The S&P ratings carry real weight. Coupled with ongoing regulatory reforms in most jurisdictions, they will help level the playing field with traditional funds. They further provide existing and prospective investors with additional comfort in relation to the quality of our funds and endorse the robustness of the investment process."

The three funds are the Constantia Low Volatility, Constantia Composite and Constantia Global Hedged Equity funds of hedge funds (see Notes below). They are domiciled in the British Virgin Isles and listed on the Cayman Stock Exchange. The investment adviser to the funds is Constantia Consulting , a joint venture between Maitland and Notz Stucki & Cie.

According to S&P, Notz Stucki rates amongst the highest quality fund-of-hedge-fund managers. Its experience dates back to 1964 and its long-standing contact network gives clout to the multi-manager selection process.

Jansen says: "We were impressed by the calibre of S&P's analysts and encouraged by their focus on the qualitative aspects of the manager selection, due diligence and risk control processes.  The S&P ratings are based on an evaluation of quantitative and qualitative factors that contribute to the long-term performance of Constantia's funds."

The Constantia Low Volatility Fund was launched in 1998 and has achieved its target return of LIBOR + 3-5% every year with annualised volatility less than 3%. The Constantia Global Hedged Equity Fund has compounded returns at just under 10% per annum since its launch in 1996 (a relatively long time in the fund of hedge fund industry). This compares favourably with world equities which returned 6-7% per annum over the same period.

"The AA rating implies that each fund demonstrates very high standards of quality based on its investment process, risk awareness and consistency of performance relative to its own objectives. Fund ratings are reviewed quarterly by S&P and it has been interesting to see how the Amaranth debacle affected the ratings of funds which carried an exposure," Jansen says.