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Watermark sheds market neutral fund

The Sydney boutique is handing over its $36 million market neutral fund to another manager, as it looks to focus on its long/short strategies.

The Watermark Market Neutral Trust, which has been running for eight years, will transition to Dalton Street Capital around October 16.

Dalton intends to keep the existing investment strategy and external service providers steady, it said in a letter to investors sent on Monday.

Meanwhile, Watermark will keep running its long/short strategy which has about $233 million in total across two vehicles - a $203 million LIC called the Australian Leaders Fund (ALF) and the $30 million unlisted managed fund called the Watermark Absolute Return Fund.

The market neutral fund's new manager, Dalton Street Capital has had an eventful year.

Its old distribution partner was Prodigy Investment Partners, a now defunct multi-boutique business set up as a joint venture between former MLC executive and current Koda Capital Founder Steve Tucker and Western Australian broker Euroz.

Euroz decided to pull out of the JV in March deciding the business wasn't scaling up, leaving Prodigy's three boutiques (Dalton Street Capital, Flinders Investment Partners and Equus Point Capital) in a lurch.

Dalton's funds were initially set to a winding up but a newly setup Sydney multi-boutique, Mantis Funds, threw it a lifeline and got the responsible to reverse its decision to wind up the Dalton Funds.

Dalton was set up in 2016 by former Credit Suisse heads Alan Sheen, and Nick Selvaratnam, who left the business in 2018.

Alan Sheen also recently left the business, crossing over to superannuation funds as HESTA's head of portfolio management.

Its current team includes Aji Matthews and Rhett Dinsdale, also formerly of Credit Suisse, as portfolio managers and partners.

Dalton's absolute return fund finished FY20 with -22% in returns. However, in recent months, it has started to recoup some of the returns with 4.9% returns for the month of August.

Read more: WatermarkDalton Street CapitalAlan Sheen
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