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Matthias Knab, Opalesque:

Neuberger Berman writes on Harvest Exchange:

While dozens of distinct hedge-fund strategies have developed over the years, and dozens more styles within those strategies, at a high level the industry can be bifurcated into two camps. Traditional strategies are those which seek alpha but may be correlated to traditional equity, credit or other market risk premia. Uncorrelated strategies are those that seek alpha but have not historically demonstrated any meaningful correlation to traditional asset markets.

The traditional strategies enjoyed a hugely impressive 2009, as markets recovered from the financial crisis. Since then, while uncorrelated strategies have never posted a negative calendar year, they have lagged the traditional strategies in five out of the eight. It is understandable that some investors have tilted their hedge-fund portfolios towards traditional strategies as a result. Other portfolios will have naturally moved in this direction unless they have been deliberately rebalanced.

We think that is problematic. Not only are uncorrelated hedge funds an important strategic element that requires a meaningful weight in a portfolio, we also believe that economic and market conditions are changing in ways that suit them much better.

Fig.1 Traditional Strategies Have Outperformed Since the Financial Crisis - view chart on Harvest

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