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Alternative Market Briefing

Alternative single manager funds more suitable for larger investors, multi-manager funds for small investors

Wednesday, September 16, 2015

Benedicte Gravrand, Opalesque Geneva:

Many investors have been embracing more sophisticated alternative investment strategies since the global financial crisis, for more downside protection. And one important decision they have had to make was whether to use single manager or multi-manager funds.

In a recent white paper, John Dolfin, CIO, and Christopher Maxey, Senior Portfolio Manager at Steben & Company, Inc., and alternative investments manager based in Gaithersburg, MD, discuss the relative benefits and drawback of each.

Alternative investment strategies (including hedge funds, managed futures and real estate) are increasingly available to financial advisors and investors through vehicles such as mutual funds, closed-end funds and ETFS, and this democratization is a positive development, the authors say. However, investors new to alternatives may not be certain as to what is most suitable to their needs.

The high dispersion in performance among alternative funds creates a risk for investors allocating to a single manager fund. This dispersion is more apparent when comparing managers within a single strategy. So there is a real risk "that investors could make the right call in their strategy allocation, but suffer the consequences of an ill-timed single manager fund choice."

Single manager dispersion risk may not be mitigated by ......................

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