Tue, Mar 19, 2024
A A A
Welcome Guest
Free Trial RSS pod
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

Previous Opalesque Exclusives                                  
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. KKR raises $6.4bn for the largest pan-Asia infrastructure fund[more]

    Laxman Pai, Opalesque Asia: The New York-based global investment firm KKR has raised a record $6.4bn for its second Asia-focused infrastructure fund, underlining investors' continued appetite for private markets. According to a media release from the alternative assets manager, the figure top

  2. Bucking the trend, top hedge fund makes plans for a second SPAC[more]

    From Institutional Investor: SPACs aren't dead. At least not to the folks at Cormorant Asset Management. The life sciences firm, whose hedge fund topped its peers in 2023, is confident it will match the success of its first blank-check company. Last week, the life sciences and biopharma speciali

  3. Benefit Street Partners closes fifth fund on $4.7 billion[more]

    Bailey McCann, Opalesque New York: Benefit Street Partners has closed its fifth flagship direct lending vehicle, BSP Debt Fund V, with $4.7 billion of investable capital across the strategy. Benefit Street invests primarily in privately originated, floating rate, senior secured loans. The fun

  4. 4 hedge fund themes that are working in 2024[more]

    From The Street: A poor earnings report from Tesla (TSLA) has not hurt the indexes on Thursday. The decline in Tesla stock, which is losing its position in the Magnificent Seven pantheon, is more than offset by strong earnings from IBM (IBM) and ServiceNow (NOW) . In addition, the much higher-t

  5. Opalesque Exclusive: A global macro fund eyes opportunities in bonds[more]

    Bailey McCann, Opalesque New York for New Managers: Munich-based ThirdYear Capital rebounded in 2023, following a tough year for global macro. The firm's flagship ART Global Macro strategy finished the year up 1