The Spektra Fund, LP is a deep value and special situation hedge fund that invests principally in North American equities according to its website. The fund seeks to obtain absolute returns while managing investment risk; it may use moderate leverage and run a concentrated portfolio.
Strong performance
According to BarclayHedge and HedgeCo, the fund ranks among the best performing hedge funds, due to a strong performance in 2013 and 2014. Looking at the following numbers, we can appreciate that Spektra really beats the market. It outperformed the S&P 500 by 413% in 2014 and 311% when taking into account both years (2013 and 2014).
A number one
The BarclayHedge Fund Database tracks more than 7,200 global funds. In this large sample, the fund was the number one performing long-only hedge fund in 2014. Also, it is within the top 1% of all equity funds listed.
Returns
The Spektra Fund also managed top rankings with HedgeCo, a leading source of hedge fund performance data. The fund secured two separate positions in “The Top 10 Funds”; one based on 2014 performance and the other for its compound annual return of 54.3%.
The Fund released its great performance for the first time, and it shows tremendously good returns:
- 47%, net of all fees in 2014
- 61%, net of all fees in 2013
The two-year return is at 138%, outperforming the two-year return of 44.3% for the S&P 500.
Philosophy and strategy
The fund focuses on value and special situations, practicing fundamental analysis, and in-depth company-specific research, searching for positive catalysts. “We are primarily focused on four things: finding companies we feel are significantly undervalued, verifying the strength and quality of the underlying business, identifying the source of the mispricing and determining future positive catalysts,” said Jason Lemelson, the managing director and the Fund’s general partner.
Top positions
The principal positions of the fund last year were: Apple, Inc.(APPL), Micron Technology, Inc. (MU, Financial) and Iridium Communications, Inc. (IRDM, Financial).
As we can appreciate, Apple was the one that has experienced the strongest price appreciation in the five-year period.
Final comment
Hedge funds look particularly attractive for a diversifier investor. But it is also true that hedge funds have not been able to beat the market in recent years, according to our previous article. The hedge fund industry assets set to surpass $3 trillion, and we still expect no industry beats the market like this fund.
The Spektra Fund employs a deep value and special situation strategy whereby it seeks to find companies that have unjustifiably low valuations while remaining fundamentally sound. Special situations such as spinoffs, mergers and acquisitions, turnarounds and misperceptions are often the source unique opportunities.
Disclosure: Omar Venerio holds no position in any stocks or funds mentioned.
