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    Hedge Funds

    Hedge Funds
    CREDIT LONG/SHORT
    TACTICAL TRADING/MACRO
    MULTI-MANAGER/MULTI-STRATEGY
    MULTI-MANAGER/APTITUDE

    Approach

    We apply a bottom-up, fundamental approach to investing across corporate credit markets. We emphasize a focus on capital preservation and risk-adjusted returns over the long-term through disciplined single-name credit selection. We seek to exploit credit market inefficiencies through a value-oriented approach and seek to minimize directional market exposure through long and short exposures.

    Value Orientation
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    We combine a value orientation to investing. We target opportunities with asymmetric expected returns, where we believe the potential upside outweighs the potential downside. Investment ideas are credit driven across the capital structure and the investment team performs rigorous fundamental analysis on issuers.

    Flexible Positioning
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    We pursue a flexible approach across four principal investment strategies: Directional Long, Directional Short, Relative Value and Special Situations. Our allocations are dynamic which allows us to tactically allocate capital with a view towards potential catalysts and changing market dynamics.

    Capital Preservation
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    We seek to preserve capital through minimizing directional market exposure by hedging on both a single name basis and at the overall portfolio level. We also seek to maintain low directional market exposure and correlations to traditional asset classes

    Benefits

    Disciplined credit analysis and portfolio management

    In-depth, bottom-up fundamental research is the foundation of our investment process. We perform a comprehensive credit analysis, including credit documentation review. In addition, we apply a multi-layer approach to risk management and well-defined risk limits.

     

    Experienced credit alternatives team

    With a heritage of credit alternatives investing, the team’s senior portfolio managers average 19 years of experience managing corporate credit through multiple credit cycles. The team has deep expertise in the fundamental analysis of leveraged capital structures with a focus on restructuring and special situations.
    Diversified source of potential return
    Alternative investment strategies may provide for diversification to help manage market risks across multiple market cycles. Alternative strategies may also provide for low beta and correlations to traditional asset classes.

    Approach

    Our strategies access investment opportunities from the entire fixed income universe and have the flexibility to dynamically adjust allocations to uncover opportunities throughout the economic cycle.

    Broad Opportunity Set
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    We generate active investment views across a broad range of fixed income sectors, including interest rates (both directional and relative value), currency, sector rotation and security selection across corporate, agency and emerging markets.

    Dynamic, Flexible Approach
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    Our Opportunistic strategies incorporate the flexibility to pursue a dynamic investment approach, allowing for meaningful changes in interest rate and credit spread exposures across the market cycle.

    Specialized Research
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    Understanding the broad fixed income investment universe requires in-depth research and analysis. Specialist top-down and bottom-up investment strategy teams rigorously examine fundamental, quantitative and technical factors to identify high-conviction ideas within their respective fixed income sector.

    Risk-Aware Framework
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    Our risk-budgeting methodology enables us to implement investment strategies effectively to fulfil investment objectives. We utilize proprietary risk management tools to ensure that active risk is employed intelligently, with proper size and diversification, and remains within the acceptable parameters of investment guidelines.

    Benefits

    Diversified exposure

    By drawing from multiple fixed income sectors, including high yield corporate credit, securitized credit and emerging market debt, investors may gain from diversification benefits that can arise due to lower correlation among positions.

     

    Potentially less interest rate sensitivity

    Actively managing interest rate sensitivity through duration positioning allows us to potentially de-emphasize the impact of interest rate movements. Low sensitivity to rate movements may potentially bring positive returns in any rate environment.
    Ability to capitalize on macro events

    Our top-down macro-oriented investment strategy teams, namely Duration, Country, Cross Macro, Currency and Cross Sector, identify opportunities that attempt to take advantage of macroeconomic themes and developments.

    Approach

    Our multi-manager hedge fund platform traces its origin to the 1969 founding of Commodities Corporation. Through strong relationships with leading industry managers, we provide clients with comprehensive and innovative solutions designed to address the ever-evolving investment landscape. We provide access to many high-quality and difficult-to-access hedge fund managers from around the world, offering these opportunities through single-manger strategies and multi-manager programs. We also have the ability to create customized hedge fund solutions tailored to our clients’ specific investment objectives.

    Rigorous Manager Selection Process
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    Informed by our top-down macroeconomic research and ongoing conversations with hundreds of global managers, our focused strategy vertical teams seek to uncover trends driving market growth. Through our holistic investing approach, we are able to access and incorporate a range of hedge fund strategies to create diversified portfolios.

    Careful and Adaptive Portfolio Design
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    We take a differentiated approach to investing, crafting innovative solutions diversified across geographies and strategies. Guided by our established risk and return profiles, our team carefully constructs and continuously re-balances portfolios to achieve long-term value creation.

    Access to Distinct Sources of Alpha
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    Our team continuously evaluates the hedge fund universe, looking to develop new and distinct ways of accessing top talent and potential alpha generation. Through our longstanding relationships and extensive points of contact within the industry, we seek to access the most differentiated and skilled managers for our investors.

    Benefits

    Longstanding manager relationships

    Our clients are able to leverage the breadth and depth of our longstanding relationships with thousands of managers across the hedge fund universe, gaining access to highly sought-after established managers, as well as new boutique firms offering unique approaches through which to access the market and execute a wide range of investment strategies.

     

    Lower relative correlation and downside mitigation

    Despite increased correlation across other asset classes, hedge funds historically display limited correlation to other asset classes and often have the express goal of taking contrarian views, enabling potential outperformance over time by reducing overall portfolio volatility.
    Comprehensive, views-driven portfolio
    Our expertise in a host of underlying strategies enables us to take a holistic approach and provide comprehensive hedge fund solutions targeting investors’ specific needs. Through our actively managed platform, we are able to develop targeted investment theses to capitalize on market trends and themes.

    Approach

    We acquired Aptitude Investment Management in December 2018 to expand our alternative investments program. The team leverages a long institutional legacy of skill-based investing to source and access hedge fund managers to construct diversified portfolios. Our approach is supported by formalized investment beliefs, including:

     

    • A less constrained approach translates into more opportunity
    • Fundamentally differentiated strategies can enhance results over time
    • Being agnostic to traditional asset classifications should promote superior portfolio architecture
    • Structures that promote alignment between managers and investors are integral to long-term success
    • Diversification is key to risk management
    Alpha Focused
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    We view hedge funds as return drivers, not just diversifiers. We believe the most efficient portfolio is one which centers on active management, or alpha, which we believe can be found in hedge funds. We construct portfolios from the bottom-up with a focus on alpha.

    Unconstrained
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    We believe in an unconstrained approach and are agnostic to traditional asset and strategy classifications. By removing the typical constraints imposed by traditional investing, we believe we can create the potential for more efficient and consistent results for clients.

    Long-Term Orientation
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    We pursue a broad opportunity set which is intended to harness a diversified stream of returns from investment skill, illiquidity premia, and a variety of market risk premia. Our long-term perspective provides for an expansive opportunity set, including the ability to invest in less liquid vehicles, and to stay the course in difficult times.

    Benefits

    Portfolio efficiency

    Our approach seeks to exploit alpha, which we believe has contributed to the high expected risk-adjusted returns that our portfolios have achieved over time. We believe that maximizing alpha is key to increasing portfolio efficiency, or return per unit of risk.

     

    Experienced team and demonstrated track record

    The team’s co-chief investment officers have advised institutional investors on alternatives strategies for over two decades. Our extensive experience helps us to identify the strength and sustainability of a manager’s investment skill, alignment and governance, investment beliefs, integrity and personal character.
    Extensive manager network

    Our clients are able to leverage our deep relationships with highly sought after hedge fund managers. Our legacy of investing in alternatives affords us a broad network to source and access managers whom we believe have significant skill.
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    For more information, please contact your GSAM relationship manager