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Alternative Market Briefing

The many benefits of multi-strategy hedge funds

Tuesday, July 16, 2013

Benedicte Gravrand, Opalesque Geneva:

Contrary to widespread thinking, multi-strategy hedge funds do offer numerous benefits, concludes a research piece from Prime Capital, an independent financial services and asset management firm with offices in Frankfurt and London.

Ivo Zonev, Director, Hedge Fund Analyst and Portfolio Manager at Prime Capital shares the firm’s research findings with Sona Blessing on Opalesque Radio, as part of the Hedgegate Series.

Prime Capital found, by comparing several indices, that multi-strategy hedge funds have outperformed the hedge fund industry "in the new millennium or since 2009," he notes. (Before 2000, the strategy had a somewhat lower volatility and lower returns.) The quality of the performance was also better in terms of systematic market risks, he adds, and in terms of higher alpha generation.

The comparative advantages of the multi strategy, which lead to risk-adjusted and absolute outperformance, he says, are, "first, the diversification benefits… it’s the investors’ only free lunch."

"If one looks at the average correlation of single-strategy hedge fund indexes since their launch in 1992 for HFRI, or 1995 for Dow Jones Credit Suisse, these correlations have been relatively low, between 0.3......................

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