Brummer Multi-Strategy (BMS) continued to evolve its portfolio during the first half of the year, adding three specialist teams, parting ways with a U.S.-focused healthcare manager, and further strengthening its central portfolio capabilities.

Brummer Multi-Strategy added three specialist teams, broadening the portfolio’s sources of alpha across credit, equities and volatility. The first is a new long/short credit strategy focused on single-name basis trading. The team identifies pricing discrepancies between related instruments issued by the same company or linked to the same underlying credit exposure. The strategy adds a differentiated source of alpha to the platform’s fixed income and macro exposure.

The second addition is a European technology, media and telecom strategy run by a team in Brummer’s Stockholm office. Europe is home to a significant number of highly specialized businesses across semiconductors, industrial software, digital infrastructure and enterprise technology. The strategy adds further depth to BMS’s technology expertise and provides exposure to an opportunity set characterized by rapid technological change and significant dispersion.

Brummer also added a volatility-focused strategy that complements its existing convexity capabilities. The strategy trades short-dated equity options and is designed to perform particularly well during large intraday moves in equities. BMS believes this complements trend-following by providing a different form of protection against market stress.

The selection approach remains highly selective and focuses on deep expertise, differentiated investment processes and strategies that add attractive and distinct sources of return to the broader portfolio. The additions were accompanied by the departure of a U.S.-focused healthcare team. The capital released has been redirected towards areas where BMS sees stronger opportunities for alpha generation and diversification.

Strengthening the central portfolio capabilities

Alongside changes to the underlying manager portfolio, BMS has continued to develop its central portfolio capabilities, which serve two complementary purposes: mitigating unwanted risks that emerge at the aggregate portfolio level and enhancing returns by selectively leveraging the strongest investment ideas generated by underlying managers. These capabilities are implemented through two complementary centre books: a risk-mitigation book and a return-enhancement book. The former is designed to address unwanted risks that can emerge at the portfolio level, while the latter seeks to enhance returns by selectively leveraging the strongest ideas already present within the portfolio. 

The risk-mitigation book allows BMS to address exposures that may not be apparent when looking at individual managers in isolation. BMS responded through targeted portfolio adjustments, including reallocating some equity risk towards European healthcare and listed real estate and introducing a market-neutral hedge against selected AI-related factor exposures. The objective was not to express a directional view on AI, but to reduce an unintended concentration in a theme that had become more important across the portfolio.

Selective growth

Looking ahead, BMS continues to see an attractive opportunity set for investment talent and expects to gradually increase both the number of teams and the breadth of strategies represented in Brummer Multi-Strategy. Growth for its own sake is not an objective. BMS remains highly selective and believes preserving the quality and diversification of the portfolio is more important than increasing its size.