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Dean Barr, Head of Liquid Investment at Citigroup Alternative Investments, makes the case for multi strategy funds:
For some, 2005 represented a continuation of the low return, low-volatility environment that began in 2004
for hedge funds. The HFR indices showed that the average hedge fund was up 9.3% for 2005. Less still
were the funds of hedge funds, which returned 7.5%. Is this what we should expect from these type of
investments going forward? Is it the end of the growth phase for hedge funds and funds of hedge funds?
According to a recent survey, hedged assets reached a staggering $1,280 billion in 2005. This happened despite
low historical returns, one-off scandals, funds of hedge funds redemptions and increased regulatory scrutiny.
While it is convenient to suggest that hedged asset returns still outperformed traditional stock or bond indices,
there are very powerful demographic and demand driven trends that decidedly point to continued growth and
allocation toward hedged assets. In fact, by some studies, it is not unreasonable to expect a doubling of hedged
assets by 2010 to $2,500 billion, representing a compounded 15% growth rate over the next 5 years.
We believe the hedge fund industry is in the early stages of a powerful move toward more calculated allocation
of risk exposure and leverage to meet future liabilities. This is true for institutions as well as individuals. The
result of this pursuit is the recognition that beta is cheap and alpha is rare, ...................... To view our full article Click here
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