Since the inception of the Aston Hill Capital Growth Fund, Portfolio Manager and Co-Chief Investment Officer Jeffrey Burchell has generated an annualized return of 11.6%, providing 77% of the returns of the S&P 500 with a down capture of just 17%.

Highlights:
  • Experienced hedge fund manager running a long-biased, long/short equity mutual fund currently focused on small, mid and large cap U.S. equities

  • Provides a way to defensively start allocating into U.S. equities. Low correlation to typical Canadian investor’s portfolio with limited-to-no exposure to resource sector or Canadian financials

  • Small, nimble, opportunistic fund
  • Style and sector agnostic

  • Use of options, cash and shorts to mitigate volatility

  • Actively managed, non-indexer, largely currency hedged

  • Strong compliment to a discretionary advisory business

  • Sold by way of prospectus with daily liquidity

Aston Hill Chart

Performance for Series A as of May 31, 2014. Inception for the Fund is May 27, 2011.

Risk Management

In an article titled The Future of Asset Management published by the CFA Institute in February 2013…

300 asset managers, pension consultants, and fund distributors in 30 countries managing assets of $25 trillion were asked how many systemic crises they expect over the next decade:

Aston Hill Chart



Do you have shock absorbers in your portfolio?

“I’d rather make less money than lose money!”
– Jeffrey Burchell, Co-Chief Investment Officer and Portfolio Manager

Aston Hill Chart

Here are the top 5 ways the manager aims to preserve capital:

Cash Used as an Asset Class

The manager regards cash as an asset class and uses it as a tool to reduce volatility within the Fund.

During times of market volatility, the manager will increase the cash weighting in the Fund to decrease exposure to the market. This also allows him to opportunistically deploy cash to take advantage of buying opportunities as the market rallies.

1. Cash Used as an Asset Class

Use of Shorting

The manager uses shorts to hedge the portfolio in times of market uncertainty. Typically the short weighting within the portfolio will fluctuate between 3 – 15% depending on the current market environment. The manager will short individual stocks he feels are overvalued and have weakening fundamentals not fully priced or recognized by the market; if he has a negative view on an entire sector or asset class, he can reflect this broader outlook by shorting an exchange-traded fund (ETF).

2. Use of Shorting

Actively Managing Currency

The manager’s primary focus is on picking good stocks independent of currency. However, in order to dampen volatility the manager actively hedges between 40% - 100% of the portfolio depending on his current outlook. In general, the manager holds the view that the US$ will appreciate relative to the CAD$.

3. Actively Managing Currency

Use of Options

“It's like fire insurance for your house.”

Options (buying puts and calls) is like having home insurance and allows the manager to buy protection for the stocks in their portfolio. Option writing can also earn incremental yield.

  • Puts provide a low cost way to protect capital
  • Keeps the upside potential intact, but avoids material loss on the downside
4. Use of Options

5. Diligent Sell Discipline

“I am not married to my stocks!”

When a security approaches the Target Revaluation Level (7 – 10% ), the manager immediately reviews the position and revisits why he liked the story…

If the story has changed:

  • Sell the stock then revaluate
  • Immediately setup a call with management
    and canvas analysts to see what changed

If the story has not changed:

  • Review the original analysis and
    review why he liked the story
  • Decide if the valuation is cheap enough versus
    the industry and the market for him to buy more
5. Diligent Sell Discipline
1. Cash Used as an Asset ClassX

Cash Used as an Asset Class

The manager regards cash as an asset class and uses it as a tool to reduce volatility within the Fund.

During times of market volatility, the manager will increase the cash weighting in the Fund to decrease exposure to the market. This also allows him to opportunistically deploy cash to take advantage of buying opportunities as the market rallies.

2. Use of ShortingX

Use of Shorting

The manager uses shorts to hedge the portfolio in times of market uncertainty. Typically the short weighting within the portfolio will fluctuate between 3 – 15% depending on the current market environment. The manager will short individual stocks he feels are overvalued and have weakening fundamentals not fully priced or recognized by the market; if he has a negative view on an entire sector or asset class, he can reflect this broader outlook by shorting an exchange-traded fund (ETF).

3. Actively Managing CurrencyX

Actively Managing Currency

The manager’s primary focus is on picking good stocks independent of currency. However, in order to dampen volatility the manager actively hedges between 40% - 100% of the portfolio depending on his current outlook. In general, the manager holds the view that the US$ will appreciate relative to the CAD$.

4. Use of OptionsX

Use of Options

“It's like fire insurance for your house.”

Options (buying puts and calls) is like having home insurance and allows the manager to buy protection for the stocks in their portfolio. Option writing can also earn incremental yield.

  • Puts provide a low cost way to protect capital
  • Keeps the upside potential intact, but avoids material loss on the downside
5. Diligent Sell DisciplineX

5. Diligent Sell Discipline

“I am not married to my stocks!”

When a security approaches the Target Revaluation Level (down 7 – 10%), the portfolio managers immediately review the position and revisits why he liked the story…

If the story has changed:

  • Sell the stock then revaluate
  • Immediately setup a call with management
    and canvas analysts to see what change

If the story has not changed:

  • Review the original analysis and
    review why he likes the story
  • Decide if the valuation is cheap enough versus
    the industry and the market for him to buy more

Low Volatility Returns

The Aston Hill Capital Growth Fund has been down more than 1% in one day  only  6% of all its negative days, versus 25% for the S&P 500 Total Return Index:




Downside Protection

The Fund has demonstrated limiting downside risk during the S&P 500’s largest drawdowns:

  • 100% of the time the Fund outperformed its benchmark in its negative months
  • 45% of the time the Fund has generated positive returns when the benchmark sold off

In addition to protecting when the market has sold off, the Fund also has had a demonstrable track record of participating when the market has rallied:

Definition For:

HOWEVER… The Up Capture Ratio does not count the Fund’s performance in months when the Index was down, but the Fund was up. This is how the Fund has generated 77% of the returns of its benchmark since inception.

Mutual Funds vs. Hedge Funds

A mutual fund can achieve all of the returns of a hedge fund, but without the volatility.


Why Size Matters

Smaller does not mean riskier, it means more opportunity!

Experts agree that size
reduces performance…

“There has been a considerable amount of non-sense written on this topic. I believe that every professional investor knows that it is an ironclad law that size reduces outperformance, but I also understand the investment guild’s vested financial interest in muddying the water.”
- Jeremy Grantham, Chairman, GMO

So would you rather be invested in a 2 billion dollar fund, or a 200 million dollar fund?

Advantages of a smaller fund:

BUT, smaller does not mean riskier!

DISCLAIMER: All performance information is as of May 31, 2014 and is for Series A of the Fund. Commissions, trailing commissions, management fees and expenses all may be associated with Mutual Fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual Funds are not guaranteed, their values change frequently and past performance may not be repeated. Source: RBC IS, Bloomberg, PerTrac.

Contact your Aston Hill Sales Team: 77 King Street West, Suite 2110, PO Box 92 Toronto, ON M5K 1G8 Tel: 1-(800) 513-3868 or (416) 583-2300 / funds@astonhill.ca / www.astonhill.ca

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Up Capture

The Up Capture Ratio is a measure of the Investment’s compound return when the Index was up divided by the Index’s compound return when the Index was up. The greater the value, the better.

Down Capture

The Down Capture Ratio is a measure of the Investment’s compound return when the Index was down divided by the Index’s compound return when the Index was down. The smaller the value the better.

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