Hedge funds can play an important role as a diversifier in traditional multi-asset portfolios. As hedge funds are less constrained than traditional long-only funds, they can generate different investment outcomes. In fact, since 2000, hedge funds have matched equity market performance with half the risk*.
In addition, hedge funds can provide an element of cushioning or protection from the risks associated with traditional long-only strategies. Hence, a long-term allocation to hedge funds can help enhance risk/returns.
*This level of risk is not guaranteed and may shift over time.
Director – Distribution (UK & Ireland)
After large and sudden drawdowns in both 2020 and 2021, many allocators simply want out of traditional fixed income; meanwhile, with alpha back, hedge funds appear to have much better return potential with comparable or even lower risk*.
The difficult reality today is that fixed income investors face paltry expected returns with potentially big downside risk. Both rates and credit spreads are at or near historical lows. As a practical matter, as both approach the “lower bound” of zero, return expectations drop and risk rises. The risk reward has changed.
*Low risk does not mean risk-free.
The difficult reality today is that fixed income investors face paltry expected returns with potentially big downside risk.
Hedge Fund replication seeks to identify the core market drivers of performance of hedge fund strategies and invest directly in liquid and transparent instruments (e.g. futures) to deliver comparable results. Replication strategies have several features that are in line with investors’ needs, they:
• Seek to match or outperform a diversified pool of Hedge Funds
• Work seamlessly within the constraints of UCITS funds and offer daily liquidity and transparency
• Closely match the performance of the targeted pool of Hedge Funds eliminating underlying manager risk
• Have an efficient fee structure
Hedge Fund replication seeks to identify the core market drivers of performance of hedge fund strategies and invest directly in liquid and transparent instruments
For well over a decade, DBi has been singularly focused on delivering hedge fund alpha in client-friendly structures. Unlike pure quant firms, DBi’s deep understanding of how hedge funds actually invest has guided which strategies they seek to replicate, and which cannot be replicated, and which methods of replication are most likely to work over time.
Past performance is no guarantee of future results. Investing is speculative and involves risk, including the possible loss of principal. The information provided is not an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities. Any opinions, forecasts, assumptions, estimates and commentary are current only as of the time made, are subject to change without notice and cannot be guaranteed for accuracy. Investors should make their own appraisal of the risks and should seek their own financial advice regarding the appropriateness of investing in any securities or financial instrument or participating in any investment strategy.