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Hedge funds may have been in existence since 1949, but it has been over the past twenty years that we have seen a dramatic surge in the number of hedge fund managers and strategies. Such funds seek low correlated returns to traditional long-only investments, utilizing a wide range of investment strategies across multiple asset classes and regions.
Over the years, the hedge fund industry has proved its worth many times over and has become a value-added component in a diversified investor portfolio, but such investments should never be taken lightly. Of the thousands of managers, only a handful will make the grade, with many lacking the tools and mentality for this business. Most managers have a good story to tell, yet can still fall short in a number of areas, making it all the more important that the due diligence process provides a full and clear understanding of each manager and their funds, both quantitatively and qualitatively.
The multi-manager approach offers investors an efficient method of accessing the hedge fund universe, with the added benefit of diversifying investment risk across hedge fund investments and managers. By investing in multi-manager funds rather than allocating to specific managers, investors gain from well honed due diligence processes, extensive quantitative and qualitative tools, constant monitoring, access and relationships with top hedge fund talent, as well as the ability to tailor investor portfolios. In these markets, multi-manager funds have become core allocations in many portfolios, as investors seek to improve their risk-adjusted returns, with various multi-manager strategies offering better returns with lower volatility, than many traditional long-only funds.
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