Alternative Investment Strategies Funds |
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Alternative investment strategies (or hedge funds) are considered to be an asset class separate from traditional assets such as equities, bonds, property and cash. Although hedge funds also invest in publicly traded securities such as equities and bonds, this is where the similarities with traditional, so-called long-only portfolios end.
Hedge funds represent a distinctive style of asset management, where the aim is to produce absolute returns (i.e. stable and positive returns) with low correlation with traditional asset classes. Hedge fund managers have the freedom to pursue any investment strategy, such as going long of the market, buying a security in the hope that it increases in value, or short, selling a security in the hope that the price will decline so that it can be bought back at a lower price. This flexibility gives hedge funds a greater probability of producing positive returns even when markets are down, and explains their popularity in bear markets.
The Handbook for Alternative Assets defines a hedge fund as “a privately organised investment vehicle that manages a concentrated portfolio of securities and derivative instruments, which can invest both long and short, and can apply leverage”.
Unlike unit trusts hedge funds are not managed on a relative return basis, therefore are not required to invest in a predefined style, such as growth or value, and are not limited to invest in any specific sector such as resources, industrials or financials. Instead, they engage in a more active style of management, seeking various opportunities in the market, with the sole purpose of producing absolute returns and limiting downside risk.
When combined in a traditional long-only (i.e. buying an asset in the hope that the price will rise) portfolio of equities and bonds, hedge funds offer an attractive opportunity for diversification. Hedge funds with the potential for consistent absolute (i.e. positive) returns, low volatility and a low correlation with traditional asset classes, can reduce the overall risk of a portfolio and improve returns.
This is illustrated by the efficient frontier, which shows the range of optimal portfolios plotted along a curve that has the highest expected return possible for a given amount of risk. The inclusion of hedge funds in a portfolio shifts the efficient frontier up and to the left, where the benefit to the investor is increased return for the same or lower levels of risk.
Hedge funds are entrepreneurial or opportunistic in nature, providing investors with new investment opportunities that cannot be obtained through a traditional long-only investment philosophy. Hedge funds are furthermore managed by some of the most talented fund managers, who have often left their institutions to operate at smaller independent boutiques. They seek to use their talent to exploit market opportunities across all asset classes and irrespective of market direction. In most cases every single trade hedge fund managers execute is a calculated move and this dedication shows in their ability to consistently outperform the market.
Hedge funds are now more accessible than ever before and gaining in popularity among both individual and institutional investors, and with their unique risk/return characteristics should be considered by investors for inclusion in optimally constructed investment portfolios.
In order to reduce the risk profile of a hedge fund, it is recommended that investors invest in a fund of funds. The Plexus alternative investment strategies product range includes a domestic fund of hedge funds and an international fund of hedge funds.
Plexus Mauldin Bull's-eye Fund of Hedge Funds
Plexus's Mauldin Bull's-eye Fund of Hedge Funds is structured using select best-of-breed hedge fund managers. Hedge funds employ the ultimate absolute return-oriented strategies to deliver consistent positive returns in all market conditions. Plexus ("Fund Manager"), together with the specialist advisory services of the Sygnia Alternative Investments team under the leadership of Simon Peile ("Investment Adviser"), selects the best available hedge fund managers in South Africa and blends their portfolios so as to produce a well-diversified absolute return-oriented investment solution for the investor.
Plexus Mauldin Bull's-eye Fund of Hedge Funds is a multi-strategy, multi-manager fund of hedge funds that aims to deliver a consistent real growth in assets in excess of 5% per annum.
For detailed information on the Plexus Mauldin Bull's-eye Fund of Hedge Funds please click here. To view the latest fact sheet please click here.
IMPORTANT NOTICE: UNFORTUNATELY THIS PRODUCT IN OUR OFFSHORE RETAIL PRODUCT OFFERING IS CURRENTLY CLOSED FOR NEW BUSINESS.
The Plexus Mauldin Global Alternative Strategies Fund is a feeder fund for the Millennium Wave Fund (“the Fund”). This fund is a multi-manager, non-directional, multi-strategy global fund of hedge funds that blends a diversified range of investment strategies in an optimised manner.
For detailed information on the Plexus Mauldin Global Alternative Strategies Fund please click here. To view the latest fact sheet please click here.
