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Alternative Market Briefing

Fund of hedge funds managers 'need to trust the driver'

Monday, November 21, 2011

Alexandre Col
Benedicte Gravrand, Opalesque Geneva:

Hedge funds are back to their 2007 peak in terms of assets, at around $2tln – but it’s not the case for funds of hedge funds (FoHFs). Especially when it comes to European FoHFs, which used to use much more leverage than their U.S. counterparts.

The current crisis is similar to the ’08 credit crisis, said Alexandre Col at Terrapinn’s Hedge Funds World Zurich 2011 conference on Tuesday, and even if it is more about the public sector this time around, hedge funds could still lose money. Col is head of investment funds at Banque Privée Edmond de Rothschild S.A. , a Geneva-headquartered private bank.

However, one should look on the long term horizon. FoHFs have achieved what they were paid for, he said, that is, much higher returns than equities. Investors could have doubled their money between 2001 and 2011 in a diversified portfolio of hedge funds.

Among the current trends in the hedge funds industry, Col noted, we have the consultants, who "are now dominating the market." They are like FoHFs managers, he explained, but do only half of what FoHFs managers do. There is neither added value nor any negative value in using a consultant.

Another trend is found in investors asking for more transparency – including FoHFs managers. However, he noted, allocating to a h......................

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