interview
five minutes with...
Theodoros A.
Costeas
CFA, Portfolio Manager,
Byron Capital Partners (Cyprus) Ltd
W
hat was your reaction to Byron
Capital Partners
(Cyprus) winning
the award of Best
Performing Relative Value - Fixed Income
(inc Credit) Fund for 2012 with the Byron Fixed Income Alpha Fund UCITS IV
at the UCITS Hedge Awards 2013?
We were extremely pleased to receive such
recognition, especially as this was a panEuropean award. One of the aims of the
business has been to be able to compete with
the best funds internationally and this recognition partly validates this ambition. Byron
Fixed Income Alpha Fund ranked among
some of the best names in the UCITS hedge
fund space. Winning a spot along Odey
Asset Management, Brevan Howard, and
GAM is not a trivial achievement.
Is the success of this particular Fund
judged solely in terms of return or does
it stand out among the others that you
manage for other reasons?
The criterion for selecting the winner of this
award is purely quantitative. Funds are selected from a database of 500 funds based on
risk-adjusted returns. In simple terms, this
means the number generated by the division
of the annual performance return by the
volatility of returns. Low volatility of returns
means low risk, translating into a higher
risk-adjusted returns measure. We generated
7.43% of annual returns net of fees in 2013
with an annual volatility of 1.83%.
What was it about the Byron Fixed Income Alpha Fund UCITS IV that earned
it the judges’ approval and the accompanying award?
The success of the fund is a result of a whole
investment decision-making process with
four risk management pillars central to its
methodology: market risk, credit risk, liquidity risk management and high diversification
are strictly employed to result in a portfolio
that can perform well under any market conditions. The strict risk management methodology reduced the maximum drawdown
of the fund, which measures how much it
lost from peak-to-trough, to 0.43% in 2012.
The Fund invests predominantly in a globally diversified portfolio of sovereign and
corporate bonds, overlaid with some parallel
strategies. This portfolio currently provides
an interest income through bond coupons
of 4.50% but this is only one component of
returns and should not be seen as a prediction of annualized returns. Last year, most of
the profits came from trading strategies, with
72 out of 76 positions being profitable.
Given that the Fund industry in Cyprus
is still in its infancy, how much more significant is such an award?
Taking into account recent events in Cyprus, this award is all the more significant as
it promotes the country’s financial services
industry and Cyprus itself in a positive light
against a difficult current backdrop. As the
only representatives from Cyprus at the
awards dinner in London, it was a great op-
14 Gold the international investment, finance & professional services magazine of cyprus
portunity to discuss Cyprus with other fund
managers and project a positive image of the
country. The fact that the award was in the
area of UCITS, which is rapidly becoming
the investment vehicle of choice for both
institutional and retail investors in Europe
and globally, highlighted the fact that
Cyprus-based asset managers can compete
with the best in providing highly-regulated
investment fund solutions.
What needs to be done if the island is to
become a thriving Fund centre, something that Malta has managed to achieve
so spectacularly?
There is a lot of competition from other
Fund centres, not only from Malta but
from Ireland and Luxembourg. The Irish
Fund Management Industry, which has
had tremendous support from the Irish
government, employs around 12,500 people
providing a range of value-added services,
including fund administration, transfer
agency, custody, legal, tax and audit services.
This serves as a good benchmark of what
can be possible in Cyprus in the future and
the job opportunities that the industry can
create. Other financial centres, particularly
in the Middle East, are offering innovative
solutions to encourage funds and fund/asset
managers to set up a presence in their respective financial centres. In comparison with
other financial centres, Cyprus is cost-competitive and can provide high quality human
capital but, as in any industry, innovation is
required.