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Dr Christoph Gort Benedicte Gravrand, Opalesque Geneva:
Liquid funds – especially the UCITS-compliant sort – are creating a flood, so to speak, as demand for them increases. But even if liquid funds meet one the requirements that many investors now have, they do not necessarily meet others, especially when it comes to performance. Managers during a panel at last week’s Terrapinn’s Hedge Funds World Zurich 2011 conference agreed on that much.
"High liquidity is only possible in some strategies. There is no point in promising it if it is going to become a problem," said Dr Christoph Gort, partner at Siglo Capital Advisors, a Zurich-based investment advisory boutique. He believes that investors do realise that longer lock-ups can amount to less risks. Besides, some investors don’t even need high liquidity.
Less liquidity offers the potential for a good pay off in the long run; some hedge funds have seen huge rebounds after their ’08 losses after all.
Furthermore, there is generally less capital chasing illiquid trades. And avoiding crowded environments – even if those can be riskier – means chasing potentially higher returns.
Gort thinks that investors are more confident with longer lock-ups if co-investors have the same view. Also, he noted, it is only fair for investors who put up capital for, say, two years, to ask for lower fees.
Indeed, "comparing with peers who have the same long term hori...................... To view our full article Click here
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