Most investors cannot afford to lose money, so are increasingly looking toward absolute return vehic...
Most investors cannot afford to lose money, so are increasingly looking toward absolute return vehicles, according to Richard Tomlinson, head of multi-strategy products at Old Mutual Asset Managers.
He said hedge funds form ideal absolute return investments. That is because they are alpha oriented, using various tools in order to hedge out unwanted risks.
Furthermore, they can benefit from a position they believe will rise or fall in value. Another advantage is that hedge funds are unlikely to be aligned toward a benchmark.
Tomlinson said there is a wide universe of hedge fund strategies, which means more opportunity to add value. These include equity market neutral, fixed income arbitrage, global macro, long/short equity and managed futures.
"By allocating between different hedge fund strategies it is possible to achieve the appropriate risk/return profile," he added.
Using these within a structured protected fund format offers added value with tailored risk and returns profits and additional security.
In particular open-ended protected funds are ideal for long-term investing.
Meanwhile, holding hedge funds within a managed account provides the manager with the best possible way of effectively managing a portfolio of hedge funds. These offer full portfolio transparency with independent pricing and efficient risk monitoring. Additionally, they reduce operational risk and offer daily liquidity.
Old Mutual offers the Prosper 80 fund, which is an actively managed fund of hedge funds that incorporates all market strategies. The fund is structured and managed as a medium to long-term investment with the aim of delivering cash plus returns (4% above BOE after charges, over a three to five-year period) in all market conditions with low downside risk.
The plan also offers a protected price of 80% of the highest ever fund price through the use of Constant Proportion Portfolio Insurance (CPPI).
Hedge funds form ideal absolute return vehicles
Wide universe of hedge fund strategies provide opportunity
Structured products provided added value
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