| 1 |
Avoid poor manager
selection, the biggest risk in hedge-fund investing
Many changes can occur in funds that investors
aren't always aware of, so it is essential to
continuously monitor fund managers and replace
them if necessary. This way, your investment stays
on track with your goal. A continuous research
approach also helps keep the money-manager-turnover
rate in the low 7% to 10% range, which keeps costs
down.
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| 2 |
Diversification is
the key to risk control – use it to your
advantage
Hedge funds have the ability to make a valuable
contribution to the risk-reward profile of any
investment portfolio because their performance
lacks correlation to other asset classes, which
means that even when other assets such as stocks,
bonds or real estate might be doing poorly, your
portfolio makes money consistently. This results
in lower portfolio volatility and increased returns.
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| 3 |
There are
no free lunches – if it sounds too
good to be true, it probably is
All investments carry some level of risk.
Our time-tested investment approach rests
on the following foundations: first, that
diversifying among asset classes is one
of the most prudent approaches to managing
risk; second, that investment styles move
in and out of favour with the market;
and third, that even the best investment
managers do not stay on top for extended
periods of time
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| 4 |
Know your enemy – if you don't understand
what you are investing in, don't invest
Don’t invest in hedge funds without an
experienced ‘guide’. The most consistently
successful hedge-fund investors tend to be the
so-called ‘fund of funds’ managers,
where their worldwide network of analysts and
partners allows these managers to evaluate thousands
of different fund managers and strategies.
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| 5 |
You can't buy past performance, so don't
use it to pick hedge-fund managers
The successful fund-of-fund strategies give
the most weight to the value of the manager's
investment process and the strength of the manager's
organisation. You can avoid the performance-chasing,
market-timing game by letting a professional
fund-of-funds manager hire and replace managers
when needed to create optimal combinations.
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| 6 |
Researching hedge funds - a mixture of
art and science
Portfolio construction and diversification opportunities
are greatly enriched by the complementary strengths
of different hedge fund strategies. Some place
an emphasis on maintaining low market exposure
and consistency rather than the magnitude of
return, while others focus on outright price
movements in the securities or instruments traded.
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| 7 |
Size matters – the economics of hedge-fund
Investment
Generally speaking, the point at which
it becomes cost effective to create your
own portfolio is well in excess of US$10
million, based on fees alone. You can
step back and relax while the experienced
fund selector manages the managers. This
solution provides you with a way to get
high-calibre investment management in
a framework that features in-depth diversification.
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| 8 |
Manager access – the economics of
hedge-fund Investment
Many first-time investors may find it difficult
to access quality managers. The value-added
role that a fund-of-funds manager plays often
hinges on the manager’s ability to provide
access to the capacity of exceptional hedge-fund
managers that are sometimes closed to investment,
as well as expertise in manager due diligence,
strategy selection, portfolio construction and
monitoring.
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| 9 |
Beware the fees that eat your gains
Investors would be better advised to find funds
that charge performance fees only. The harsh
reality is that most fund-management companies
can afford a degree of complacency, because
they always get paid. During the three-year
bear market that began in 2000, millions of
investors lost a significant proportion of their
savings in equity managed funds. In spite of
all this, the fund managers took their regular
management fee for losing their clients’
money.
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| 10 |
Multi-manager hedge funds – all the
gain, none of the pain
How would you like to have an all-star fund
manager at every position in your portfolio?
The multi-manager approach provides access to
expert research and proven investment experience,
access to top-tier funds not available to smaller
investors, instant portfolio diversification
and ongoing risk monitoring, active strategy
rebalancing, and lower underlying manager fees
thanks to the larger investments made.
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