Equity investors have been dancing on thin ice, and it’s difficult to say how long the ice holds. Alexander Ineichen says he is certain that at one stage the hedged approach will reveal itself again as more intelligent than a long-only approach: “To stick with the metaphor: A long-only investment style is like dancing on thin ice, while a long-short investment style is like dancing on thin ice wearing swimmies: it might look odd at times but it’s safer.”
Despite rallying equity markets, these are not times to be either “all-in or a contrarian”. Some hedge fund managers have started to call themselves “reluctant bulls” because of these market dynamics. Still, for the majority of investors, the most important question is what to do with the bond exposure. The debt issue has not gone away. While in the late 1990s and early 2000s we saw a move from equities to alternatives, at the moment assets are moving from bonds to alternatives.
We shouldn’t forget that $100 invested in the S&P 500 Total Returns Index in January 2000 grew to only $148 by September 2013. The same $100 invested in the average hedge fund portfolio grew to $218. People tend to forget that halving your wealth-- which stocks did twice in the last decade-- is not good for your long-term financial health.
Therefore, for a number of reasons, investors express enormous appetite for alternative fixed income strategies, absolute return or unconstrained approaches. The search is on for less conventional products and strategies based on select risk premia that offer maximum diversification, like catastrophe bond funds, volatility products, equity long/short, event driven, mergers & acquisitions, credit and corporate loans.
This Opalesque Roundtable, sponsored by Eurex, IDS and Taussig Capital, took place in December 2013 in Zurich with:
Alexander Ineichen, Founder, Ineichen Research and Management
Daniel Durrer, Head of Institutional & Fund Distribution (Continental Europe), GAM
Hansjoerg Borutta, Group CIO, Marcuard Heritage
Ian Hamilton, Founder, IDS
Joe Taussig, Founder, Taussig Capital
Markus-Alexander Flesch, Head Sales and Marketing, Eurex Zurich
Phoebus Theologites, CIO, SteppenWolf Capital
The group also discussed:
UCITS: For many European managers, UCITS funds have been the fastest growing product segment over the last two years. UCITS has become something close to a ‘must-have’ label for many providers. But not each UCITS is a mega seller. What is essential to succeed in this space?
AIFM versus UCITS: As costs and paperwork are onerous for smaller managers to operate under AIFMD, managers go with the fund format rather than the licensing under AIFMD.
Global regulations cause a “train wreck in slow motion”: Most US managers are not aware they will need a person on the ground in Europe. Meanwhile in Europe, the end of the “one man shop” asset managers is near.
How the Scotstone Group offers an AIFM umbrella for smaller managers
Consolidation as a win-win: Why Arkos Capital is happy GAM acquired them
Small is beautiful, or getting comfort in great numbers? How family offices decide if they should invest in an emerging or established hedge fund manager?
Why you should not be bothered when hedge funds “lag the stock market”
Why Eurex Clearing’s Prisma is unique in the exchange world
How managers from $10m to $1bn can benefit from brand building and product extensions
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