EFC Fund
Strategy
The Northlight European Fundamental Credit Fund is a Long/Short credit Fund with a directional bias. The Investment Manager employs extensive bottom-up fundamental analysis to identify attractive risk return opportunities, primarily within the European high yield credit market. The Investment Manager monetises high conviction trade ideas through capital allocation to long, short, event and relative value strategies. Trading and hedging strategies are used to achieve liquidity adjusted absolute returns and manage tail risks.
About the Fund
The Fund is based in the Cayman Islands. The Investment Manager is Northlight GCI. The Investment Advisor to the Fund is Limestone Advisors Ltd.
Objectives
The Fund targets attractive risk-adjusted returns with an emphasis on capital preservation, liquidity and risk management. The Fund seeks to preserve investor capital over the economic cycle and to provide investors with ongoing liquidity and transparency through portfolio selection, low leverage and the 3wayNAV™ framework.
Investment Approach
- European Focus: The Fund invests in credit instruments, primarily in the European high yield credit market. This allows the Fund to take advantage of the Investment Manager’s extensive experience in this area and to benefit from the growth of this market segment.
- Alpha Generation: The Investment Manager utilises deep fundamental analysis to generate high conviction ideas that are then allocated to Long, Short, Event or Relative Value investment strategies. This strategy set gives the Investment Manager the ability to monetise opportunities in different market conditions. The investment strategies are supported by a Trading strategy which maximises excess returns. The Fund as a whole may have a directional bias.
- Capital preservation: Capital preservation is inherent to the investment process. The Investment Manager specifically mitigates the market risk of the portfolio using the Trading strategy and systemic risks using the Hedging strategy.
- Focus on Liquidity: The Fund is focused on the more liquid part of its investment universe. Market technical analysis specifically addresses liquidity, market depth, dealer positioning, and holder base as part of the investment process.
Fund Structure
- Innovative 3WayNAV™: The Fund has three dealing NAVs. A bid, mid and offer NAV for a fair price of inflows and outflows from the Fund. The advantage of this mechanism is that it aligns investors within the Fund and offers transparency in terms of position liquidity and fund leverage.
- Alignment to investors: Half of the performance fees are reinvested alongside investors until their exit. This ensures that the interests of the Investment Manager and investors are aligned.
- Third party valuation: The 3WayNAV™ is independently calculated and published by CITCO. Bedrock RealTime S.A. reconciles the NAV and provides another level of independence in the Fund management structure.
- Independent risk management: The Fund has an independent Chief Risk Officer, who reports directly to the Board of Northlight and who is not an employee of the Investment Advisor. The independent risk control undertaken by the CRO ensures that risk limits, systems and model audits are in place and that they are functioning and adhered to. The CRO monitors the Fund’s portfolio daily, and reports directly to the Board of Northlight on a monthly basis.