New Hedge Fund Management Strategies and Alternative Investments

New Hedge Fund Management Strategies and Alternative Investments

Alternative investment got a higher inflow of retail investments post-2008 crisis. Before the financial crash only high net worth individuals or institutions were buying into such strategies.  Loss incurred in some of the safest assets in 2008, leading to a search for low-risk options. In the last 10 years, managers adopted new approach to reduce risks. Many hedge fund managers are improving portfolios where they are selecting changed parameters and constructing portfolios in a different manner. These managers are inducing specialist managers, delivering customized products and negotiating fees. Active strategies are adopted by companies where they are not waiting for the macroeconomic situations to improve for higher returns. The new strategy of the companies is to take lesser risk in comparison to pre-recession phase and try to invest in markets with lower volatility.

Complex Strategies

The recent data by FE Analytics claim in the period from Jan 2016 to Jan 2019, the Polar Capital UK Absolute Equity fund was able to deliver returns up to 57 per cent in three years, and this was one of the best of performer, and the next best was Man GLG Select Alternative fund that was able to deliver 20 per cent returns in the same duration. These types of Absolute return funds have been criticized by experts as these are highly complex and difficult to understand even by the professionals.

Due to higher complexity the risks are higher in some conditions, and the investment team need to conduct a due diligence research on products to be able to deliver in positive. Such products are becoming even more complex in the new scenarios of higher volatility and unpredictability in the markets.

Experts have found that so called safe haven funds have failed during the Brexit turmoil and in the last three years, only 64 out of 105 Absolute return funds have been able to deliver in positive. One of the worst was Argonaut Return Fund, which lost 23 per cent.

Multi-Currency, Market-Neutral and Energy-Funds

Most energy funds are dependent on markets and as the stock market rebound was seen in years from 2009 to 2016, these grew but got worst in the last three years. In general, such investments earn through risks and if the risks are low, the earnings will also be low. Alternatively, the US stock markets performed better in the last decade and annually delivered up to 13 per cent.  Multi-currency funds were selected with the expectations of lower fluctuation but the gains were not much. 

Market neutral was launched after the 2008 crisis to reduce volatility. The investment in this fund has no relation to trends in the markets and managers can use such strategies to deliver customized products. These may include long and short positions, and also fixed income vehicles.

Some strategists are using a combination of fixed yields, equities and defensive hedge funds with a scope for growth.  However, in the last decade, equity delivered higher than many such funds, and many funds with positive growth do not disclose a great deal of information.

To find out more about market-neutral funds investment, check 99 Alternatives at (http://www.99alternatives.com)