TRICKS
& TRAPS - ALTERNATIVE INVESTMENT STRATEGY
In constructing a well-balanced portfolio
of investments comprising the traditional asset classes
of equities, bonds, cash and property, an additional
asset class, known as alternative investment strategy
funds [or hedge funds], will often provide outstanding
risk diversification for the sophisticated investor.
While hedge funds have been available
for decades, their extremely high entry levels (between
US$1 and US$5 million) have made them unattainable to
most investors. Recently hedge funds became accessible
through multi-manager portfolios with entry levels of
between US$10 000 and US$25 000.
Not all hedge funds are high risk,
volatile investments. By selecting a multi-manager fund
with a carefully chosen blend of well-managed individual
hedge funds with different investment strategies, the
risk factor is lowered to conservative levels. These
funds are rapidly gaining acceptance within the portfolios
of endowment and pension funds, typically among the
most risk averse participants in the investment world.
These are some of the key benefits
of multi-manager hedge funds: -
- Lower volatility;
- Lower risk and higher returns;
- Little or no correlation with equity and bond
markets; and
- The fact that they target consistent and positive
returns regardless of whether the underlying markets
are rising or falling.
We believe that hedge funds complement the traditional
asset classes, reduce the volatility of equity-biased
portfolios and provide stable returns. |
