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Alternative Market Briefing

Should investors 'buying the dip' when a hedge fund manager's performance gets behind his historical returns?

Tuesday, August 29, 2017

Komfie Manalo, Opalesque Asia:

Hedge fund investors should look at the expectation of the strategy, the tolerated updownside/upside capture and alpha generation over a longer period of time and use that as a general framework to evaluate a particular fund instead of focusing on "consistent performance," said Johannes Asp of Stockholm based equity long/short manager Madrague Capital Partners at the latest Opalesque 2017 Nordic Roundtable. Madrague Capital has a 15 years track record and very good annualized returns, and so the question came up during the discussion if the firm would be having a certain focus trying to ensure that returns are consistent?

Asp admitted that his team "implicitly tries to ensure that the returns are consistent in the sense that we are trying to meet a certain return every year. What I think investors should do, is look at the expectation of the strategy, what's the tolerated downside/upside capture and alpha generation over a longer period of time and use that as a general framework to evaluate Madrague and other funds as well. Then looking over that longer period of time, an investor can be comfortable with the type of volatility/return a strategy has delivered over a longer period of time. As long as the fund is within that band, I wouldn't really be worried. An investor should then also rather be buying the dip......................

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