Hedge Fund and Fund of Funds
Using science for better information management
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to come. Sujects include double taxation of bonds and corporate governance.
April 19, 2012: Death of a great investment counselor, Carl H. Otto
Updated: April 20, 2012
Hedge Fund & Fund of Funds
While I am a strong believer in hedge funds, I find that there are a lot of products out there that are not worth considering. Unfortunately, for many investors, it is very difficult to pick and choose the better managers.
Hedge funds are generally sold to investors as a product with great diversification benefits and low correlation with traditional asset classes. When properly done, this is true. Unfortunately, a majority of hedge funds do include so much market exposure that when come a major correction like the one we had in 2008, these hedge funds are of no use as a diversifier in clients’ portfolios.
As with traditional investment products, we need to distinguish between skilled managers and … the others. It is not an easy task. When properly done, due diligence can significantly increase an investor’s chance of picking the skilled managers. In the Due Diligence section, I give numerous examples of what can go wrong or things to look at.
If you think you may have been exposed to some of the bad investment practices I describe in the following sections, please contact us.
We can assist in building better portfolios of both traditional (long only) and hedge funds (long-short) portfolios. We can manage such strategies both in-house and through external managers.
For more information on Hedge Fund management or choosing skilled managers (traditional long only or hedge fund/long-short), please contact us.
Dominic Clermont, ASA, MBA, CFA
