By: Bryn Hatty
Family Investment Conference South Africa: Consensus
The reasons we use hedge funds is that relative
to traditional funds, they have a broader investment
universe as well as additional investment
tools that they can use.
Uh, more specifically, the ability
to short investments allows hedge funds
to profit both in rising
and falling markets, thereby producing
better risk adjusted returns, so slightly higher returns
or similar returns with lower risk.
Ideal hedge fund should produce solid,
if not spectacular returns in most market environments
and be less reactive to general market moves, whether
that is equity or bond markets.
The risk reduction benefits of using hedge funds
actually allows us to take on slightly more risk in other
parts of our portfolio, thereby enhancing returns
while reducing risk.
At the same time, the industry has
definitely matured from the hot market
of the early two thousands when there was a proliferation
of startup hedge funds.
Most of the successful funds these days are large
well-resourced fund managers
with all the risk controls you would expect
of institutional fund managers.
In fact, many of these businesses have developed traditional
long only funds off the back
of their successful hedge fund skillset.
We tend to stick to well-established hedge fund managers
with long track records of strong performance.
In terms of the types of funds we use,
it depends on the risk profile of our clients,
so we make use of equity, fixed income,
and commodity hedge funds, as well as multi-strategy funds,
which really are a combination
of those three types of managers.
In summary, our hedge fund managers have been the strongest
performing part of our domestic portfolios in the recent
past and have
provided strong risk adjusted returns over long periods
of time, thereby benefiting our client's portfolios.