Mon, Apr 27, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

The benefits of convergence and divergence in a diversified hedge fund portfolio

Monday, August 12, 2013

amb
Andrew Fisch
Benedicte Gravrand, Opalesque Geneva:

What exactly is a convergence-divergence strategy? Andrew Fisch, Co-CIO at SSARIS Advisors, LLC explains it to Sona Blessing on Opalesque Radio. Based in Wilton, CT, SSARIS is a manager of absolute return hedge fund and hedge fund of fund strategies.

Sub-strategies in funds of funds, as we saw in the last few years, tend to correlate to one another during times of crisis, despite the managers’ best efforts to reach diversification. But those who use convergence and divergence strategies strategically can avoid this correlation problem.

Convergence and divergence are two styles of investing, Fisch states; "in periods of stress, convergence strategies and divergence strategies tend to be negatively correlated to each other, so one offsets the risks of the other, providing capital preservation under stressful environments."

Convergence strategies rely on normal market behaviour, he explains, i.e. markets that are liquid and rational. One example is the market neutral strategy.

Such strategies often require leverage to inflate returns that are normally small. However, "convergence strategies, especially when run with large leverage, when markets become disrupted… they experience these tail events as part of their cycle." At SSARIS, the managers assume that in every cycl......................

To view our full article Click here

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. U.S. does not want hedge funds to invest in offshore re-insurers for tax purposes[more]

    Komfie Manalo, Opalesque Asia: The U.S. Treasury Department on Thursday introduced a new rule aimed at limiting hedge funds’ ability to reduce their tax bills by investing in insurance companies in offshore tax havens. As a general rule, the U.S. tax laws does not allow hedge funds to use off

  2. Ruling: Hedge funds suing Argentina can have access to bond offering details[more]

    Komfie Manalo, Opalesque Asia: U.S. District Judge Thomas Griesa in Manhattan ruled yesterday that hedge funds are entitled to details of a recent bond offering by Buenos Aires, reports

  3. Hedge funds looking to continue their rally in Q2[more]

    Komfie Manalo, Opalesque Asia: Hedge funds finished the first quarter on a strong note and are looking to continue the rally in the second quarter, said Lyxor Asset Management in its Weekly Brief. The Lyxor Hedge Fund Index is up 0.4% over the week

  4. Hedge funds down -0.17% in March (+1.23%YTD)[more]

    Bailey McCann, Opalesque New York: The hedge fund industry produced an aggregate return of –0.17% in March to end Q1 2015 up 1.23%, compared to the S&P 500 which increased 0.96%, according to the latest data from eVestment. Hedge fund performance returns were mixed in March amid increased equity

  5. Fund managers express concern of overvaluation in both equity and bond markets[more]

    Komfie Manalo, Opalesque Asia: According to the BofA Merrill Lynch Fund Manager Survey, investors see growing overvaluations in both

 

banner