OAK CONSTELLATION SICAV SIF S.C.A. Sub Fund Telesto
Address: c/o Alcyon S.A.
2 Avenue du Blues L-4368 Belvaux
Phone: +352 691553551
The objective of Telesto Fund is to generate attractive returns uncorrelated to traditional markets in all market environments, including during times of rising volatility and market stress.
The Fund invests across a range of carefully selected strategies in preferred alternative ‘niche investments’. The fund’s investment objective is to seek low volatility benefitting from a combination of dissociated investment ideas with a target return of 5 to 6% per year on a 3 year investment horizon. The Telesto fund provides exposure to alternative investments similar to the way large Institutions, Family Office and Endowments manage their assets, often allocating between 30-40% of their assets to private/alternative assets.
Combining Telesto Fund and traditional assets classes improves the risk/return metrics of any portfolio by decreasing the level of risk and adding additional return when markets are turning negative.
Private assets are investments that are typically not publicly listed and traded. Because of this, they can often have lower volatility than their public counterparts, offer diversification benefits and uncorrelated returns.
Private assets are a broad range of investment types and opportunities.
As an alternative source of return, private assets can help to diversify investment portfolios and offer potential attractive returns to help meet long-term goals.
A few of the most common private asset investment types are:
Private equity investments are not traded on public markets. Private equity firms usually acquire or invest in private companies with the goal to take them public or sell them for a profit. Because assets from private equity investments are not with a public company, it is considered a private asset.
Real estate assets are usually considered private assets.
Privately managed infrastructure funds are an example of a private asset class. Examples include investments in schools and healthcare facilities.
Private credit is an alternative asset class where investments are made into non-publicly held debt and direct or private lending companies.
Telesto Fund intends to protect your money against inflation. Indeed, alternatives in which it invests provide many options for investors to protect their capital from inflation. Inflation is ultimately caused by too much demand relative to available supply. When that imbalance extends to property markets they can provide a good inflation hedge as rents and capital values increase : a landlord can charge more for rent, which in turn increases their income so it is on pace with the rising inflation. Private debt is also a good hedge, as long as collateral is robust, and based on tangible assets. In that respect, by allocating heavily in private real estate, private debt and other alternative niche, Telesto is adequately positioned to protect your capital against inflation.
Thanks to its significant exposure in private debt, Telesto intends to be resilient in rising rate environments. This for different reasons:
- In a rising rate environment, floating rate loans are highly attractive, as income can rise alongside interest rate increases. Most of Telesto’s private debt allocation is linked to floating rates.
- Privately negotiated deals: Private credit transactions are bilateral in nature and are negotiated directly between the lender and the borrower, the negotiation can include better protection, senior secured structure, covenant, which makes the credit more defensive.
- Less volatility: less volatility is expected in private assets because these assets are not traded in public markets. Private loans have offered relatively low historical volatility, while still maintaining attractive returns, when compared with the public market.
The decentralized nature of alternative fixed income and other alternatives gives them low correlation with the market fluctuations that dictate the performance of traditional asset classes like government bonds or growth stocks. It means they can be particularly effective at maintaining value during periods of high market volatility like pandemic or geopolitical instability. By allocating across a wide spectrum of alternatives, Telesto benefits from the low correlation, while diversifying the economic risks.
“Don’t put all your eggs in one basket” is a proverb that warns against investing all your resources in a single product. If something happens to the basket, you lose all your eggs. When applied to investing, this proverb directly speaks to the value of portfolio diversification. Portfolio diversification is based on the concept of complementarity. By selecting complementary investments, you can decrease a portfolio’s risk profile, regardless of the risk profiles of the investments it comprises. Alternative investments can be a beneficial addition to portfolios due to their high level of complementarity with traditional investments because they tend to have a low correlation with traditional assets. This means that if the stock market is doing poorly, Telesto Fund, which has 25+ different exposures in the alternative asset class, could perform well. Because its investments are separate from the public market, they present a great opportunity to diversify your portfolio. However, due to their relative less liquidity, an investor should always see alternatives as a complement to their traditional (liquid) portfolio and cash, not a replacement.
Hedge funds are actively managed alternative investments that typically use non-traditional and risky investment strategies or asset classes. Hedge Funds are not as strictly regulated as traditional mutual funds. Hedge funds are free to use riskier strategies in riskier ways. Notably, they frequently use leverage. They also invest in derivatives such as options and futures. In short, they are free to choose esoteric investments that conservative investors won’t touch. The investment approach and risk profile of Telesto Fund is the opposite of what an hedge fund does: when we look at a new opportunity, we focus on mitigated risk (e.g. asset-backed, personal guarantees insured,…) where leverage is limited rather than excessive. We look first at diversifying the economic exposures of the portfolio and the level of correlation to public markets, favoring predictability and cash generation of underlying real assets. Telesto offers better downside protection than hedge funds, with less volatility and correlation.
Telesto shares some features with the traditional real estate: Telesto focuses on real assets which are generating stable and predictable monthly or annual yields, generally high-occupancy real estate assets (core and core plus) with stable rental income or fixed income (alternatives). However, Telesto only invests in less crowded niche, in fragmented sectors where a consolidation strategy is possible. In such sectors, yields are higher, and underlying assets benefit from long term lease, excellent renewal rate. Telesto also adds a layer of downside protection by investing in assets offering reliable (and often government-guaranteed) cash flows even during recessions.
In addition to a seasoned investment team combining 125 years of experience, Telesto Fund is strictly regulated under the oversight of the Luxembourg regulatory authority (Commission de Surveillance du Secteur Financier), under the full AIFM (Alternative Investment Fund Manager) regime. In accordance with the EU AIFM directive, the Fund has appointed a fully licensed external alternative fund manager, IRE AIFM Hub, that is approved and directly regulated by the CSSF. The AIFM is a member of the IC, and review each investment from a risk management perspective and from a portfolio management perspective. In addition, the Fund has appointed a fund administrator, Alcyon SA, that independently values each investment and release the net assets value of the fund and performs the reconciliation of the cash movements. In addition, our custodian bank, Creand Wealth and Securities, which control and document all cash transactions.
Yes, the fund is audited annually. No qualified opinions were issued since inception.