Systematic Liquid Alpha Fund

The strategy provides exposure to a diversified multi-asset set of alternative return sources, including value, momentum, carry, and trend, led by the MS AIP Hedge Fund solutions team, headed by Eban Cucinotta. The investment process involves 15 strategies across equities, rates, currencies, and commodities, employing a systematic rules-based implementation. It aims to avoid short volatility strategies and those that are highly correlated with equities and bonds. Additionally, there is a preference for implementation methods that limit tail-risk in strategies through diversification and position sizing requirements. In risk budgeting, strategies are classified into groups by attribute using principal component and cluster analysis while each strategy is assessed if it has a market-neutral, pro- or counter-cyclical (risk on/off) profile. Strategy risk budgets are constrained given the equity and bond exposure limits while overall risk management utilises two matrixes: a short-term sample (near-term volatility and correlations) and a long-term fixed matrix (20 years with weekly data). Targets are run weekly, with rebalancing occurring approximately once a month and upon receiving flows. The strategy is designed to have a modest negative correlation to equities, achieved though strategy selection and risk weighing. The fund targets an annualized volatility of 8% over the long term.