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Alternative Market Briefing

Tax efficient investing in hedge funds presents specific opportunity

Tuesday, December 10, 2013

Beverly Chandler, Opalesque London:

The Opalesque 2013 New York Roundtable, sponsored by Maples Fund Services, Eurex and Taussig Capital saw delegates discussing the most tax efficient way of investing in hedge funds.

Bob Kim of Visium Funds opened, explaining that while their focus is to drive performance through stock selection, both on the long and short side of the portfolio, the other specific opportunity that the firm had identified was the relevance of tax-efficient investing.

"I run an equity long/short fund but it’s also tax-efficient. Why is that important? As we all know, tax rates are going up and if you are a taxable investor, taxes have become the biggest factor of your investment returns."

Kim finds that investors typically tend to focus on any fund manager's net-of-fee returns, but in fact, he believes, it's the after-tax returns that really counts. "Depending on what state you live in current tax rates could go higher than 50% and therefore considerably eat into investment performance. The fund that I run is first and foremost focused on generating good gross and net-of- fee, hedge fund like returns, but then I think about how to structure positions and manage positions without changing the economic......................

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