- Hedge Funds
Not since the introduction of the Dodd-Frank Act in the aftermath of the financial crisis have hedge funds faced such deep regulatory opprobrium.
Investor appetite for multi-strategy hedge funds remains bullish, and this shows no sign of waning. Linear Investments looks at some of the reasons why this hedge fund strategy has proven so successful.
Multi-strategy hedge funds continue to grow
Investors are piling aggressively into multi-strategy managers, an $890 billion subset of the $3.5 trillion hedge fund industry. In terms of their size, multi-strategy managers are now running more AUM (assets under management) than global macro and are not that far behind long/short equity. Examples of high-profile multi-strategy managers include names like Citadel, Millennium and Point 72.
What is multi-strategy hedge funds, and why are they doing so well?
A multi-strategy hedge fund employs a number of different managers to autonomously run a wide range of strategies across multiple portfolios, hence the name.
Whereas a single strategy manager will focus on just credit or equities for example, a multi-strategy manager will trade pretty much anything. Thanks to their diversification, multi-strategy managers performed well during the recent volatility and have largely shielded their clients against rising inflation and interest rates.
Although some investors complain that multi-strategy firms charge higher fees than other hedge funds, the reality is that the returns being generated by these managers are compelling enough to justify the added costs. Since 2000, the Eurekahedge Multi Strategy Hedge Fund Index has returned 8.3% on an annualised basis, which is over and above the hedge fund average, as an example.
At a time when returns are difficult to come by, it is easy to see why multi-strategy hedge funds have been raising money, at least relative to some, not all, of their peers.
Choosing the right prime broker
Selecting the right prime broker is critical if hedge funds irrespective of their underlying strategy are to perform well. Linear Investments takes an individual, agile approach to a customised service, differing from the big banks. Engaging with a boutique prime, who can support and understand your transactional needs is vital. While multi-strategy managers may be thriving, engaging with best in class prime brokers will be critical if they are to successfully raise capital. Speak to the team at www.linearinvestment.com to understand how we can support your business.
CFA Institute – June 6, 2023 – Multi strategy hedge funds grow in popularity but are they right for you?
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