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Alternative Market Briefing

Custom hedge fund portfolios gain traction with small to mid-size institutions

Monday, April 16, 2018

Bailey McCann, Opalesque New York for New Managers:

Large institutions have long been able to work with hedge fund managers to create their own customized portfolios, enabling them to tailor their allocations toward specific targets. Now as the market turns again toward active management, small and medium-sized institutions are going custom as well.

As the fund of funds space has grappled with middling performance and downward pressure on fees, it's been difficult for many programs to demonstrate value. Some investors have left the space while others have turned to customization. Trading a fund of funds program for a custom portfolio requires a bit more work upfront, but it can also help to maintain portfolio diversification and provide downside risk protection in the event of a correction.

"It's important to look at specific hedge fund strategies and understand what's happening in their respective category," says Tristan Thomas, director of portfolio strategy at 50 South Capital. Chicago-based 50 South, a wholly-owned subsidiary of Northern Trust Corporation, advises investors on portfolio allocations and invests in hedge fund and private equity managers. For Thomas, the key to a successful hedge fund portfolio is looking beyond headline performance numbers to consider the overall role of specific strategies in the portfolio and finding managers that you're......................

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