Aurum has evolved significantly over its 22 year history from being a firm that provides comingled fund-of-hedge-funds to one that “services some of the world’s most sophisticated investors,” says Aurum CEO Kevin Gundle.

“The essence of our business is to provide investors with a return stream that is not replicable using conventional funds. We do this by allocating to a range of unconstrained strategies, predominantly hedge funds.”

It aims to maximize outcomes in three areas: low correlation, low beta; consistency; and low volatility.

Around 70% of its clients are institutional investors and over 50% of its AuM is in segregated mandates. Gundle says Aurum was one of the first in Europe to launch an AIFMD vehicle, which is currently one of the top 10% performing multi-manager funds. It has also created bespoke solutions in fund-of-ones and has launched a UCITS fund.

“It’s about flexibility, agility and responsiveness,” he says. “It’s about being on the front foot in terms of business strategy but also in terms of what the investors want.”

It started off with offshore domiciled funds but increasingly operates under AIFMD – but it took quite some time before it launched its first UCITS product.

“UCITS is a global brand. But we did not want to put our name to a product that we did not feel we could generate returns from – or put our own money into. The explosion of UCITS funds over the years, particularly from hedge fund managers, was our opportunity to get involved. I call it second mover advantage.”

It has also reclassified one of its funds as an impact fund, targeted at creating social outcomes with its proceeds. It funds the environmental charity Synchronicity Earth: “It has had some remarkable successes and we are proud to be the leader in that organisation.”

While investors understandably have a tendency to focus on managers’ performance, Gundle says “we focus on businesses as well”. He says 50% of what Aurum does is focusing on whether the manager has a business that backs up its business activities in a way that meets its standards.

“Operational risk is an unrewarded risk. You can never make money from it, only lose money. Our operational due diligence team can recommend a veto on any investment – and it occasionally uses that veto. We do not get star-struck – we want to understand the substance and know whether the strategy is enduring.”

Aurum favours three core strategies: quantitative equity market neutral, macro and multi-strategy. “We do not target and invest in low volatility funds. We do not believe that is a sustainable strategy – we get low volatility by investing in a manner where we select our strategies based on their complementary nature. It’s about portfolio construction and position sizing. It is about blending strategies to get a return stream that is better than the sum of its parts.”

He says the overarching principle is for maintaining liquidity. “We do not like to harvest the illiquidity premia, a carry or have complexity,” he says. For example, he does not consider the risk/ reward of credit to be favourable due to the risk of illiquidity resulting from a market event. “We have plenty more ideas than we have money, so we are happy not to participate.”

The financial markets have been greatly affected by government and central bank action in recent years, reducing the effectiveness of technical analysis. Likewise, betting on the outcome of official meetings is unlikely to be successful. “That is why liquidity is so important – we try to keep the duration of our activities very short term.

“One of our investors once said ‘you are in the hedge fund industry but sit outside it’,” he adds. “If we can continue to be viewed like that then it means we are doing a decent job.”