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Benedicte Gravrand reports 'live' from the GAIM 2008 Fund of funds conference in Geneva.
Zaker: invest in HFs as a mandate, not an asset class
Sassan Zaker, from Bank Julius Baer, took a look at hedge fund portfolio construction and optimisation, by asking if institutional asset allocation was part of the problem.
Institutional investors share a common asset allocation framework. Their bible is provided by the Modern portfolio Theory (which proposes how rational investors will use diversification to optimize their portfolios, and how a risky asset should be priced), which means the optimisation of asset clashes.
But there are building blocks; "we're talking about trillions of dollars," he said. If hedge funds are an asset class, then there are trillions of dollars of allocation. So the need for tactical allocation is very important.
Institutional investors have used hedge funds as an alternative path to markets. That path has become a cycle which is potentially destabilising. He recommended trying to solve immediate short term questions and reviewing methodologies. Hedge fund allocation should be viewed as mandate, not an asset class.
He said that Julius Baer now holds more than 30% in cash, and will hold more than 50% by year-end.
All about listed hedge funds today
Mark James, of Royal Bank of Scotland (RBS) talked about the listed hedge fund sector, which has evolved from a cottage ind...................... To view our full article Click here
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