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Jakob Lage Hansen By Beverly Chandler, Opalesque London:

Jakob Lage Hansen, investment strategist at SEB X-asset team and the main analyst that produced the SEB report Hedge funds – avoiding a simplistic approach that was published earlier this week, feels that the hedge fund world needs to go back to its roots, since the disastrous returns of 2008.

Hansen is one of a team of analysts within the SEB X-asset team which conducts research into broad-based asset allocation. They start with a macro perspective, judging economic cycles and translate that into an optimal asset allocation mix for an investor, usually a professional investor.

Their study found that hedge funds were not living up to their 'hedge’ fund name. "On aggregate, hedge funds haven’t been a good diversification and have not lived up to the 'hedge’ part of their name in 2008 and 2011" Hansen says.

"Last year’s returns for hedge funds were close to what we would expect given inherent betas to long equities, long credit bonds etc" Hansen says. "It wasn’t unexpected that if you take all the hedge funds or even made a random selection, you are quite likely not to get an investment that diversifies your portfolio. You have to be selective if diversification is what you are after."

Since the 1990s, the alpha potential of hedge funds has come down accordi......................

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