The hedge fund industry is witnessing a significant trend in 2024 with a burgeoning wave of AI-driven hedge fund launches, reflecting a pivotal shift in how funds are managed and investments are strategized. Read about the latest insights and updates in the world of hedge funds by subscribing to Alpha Watch Tower here: https://lnkd.in/gmaXp72X #hedgefunds #talent #assetmanagement #hiring #financialservices #investment
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Series: Insights on Mutli-Strategy Fund of Hedge fund management. Post 1: Diversification is a key...but As the Chief Strategist of our fund of hedge funds, AMP, I cannot stress enough the critical importance of diversification. Diversification is the cornerstone of managing a multi-strategy fund of hedge funds. By spreading investments across various strategies, sectors, and asset classes, we can significantly mitigate risks and enhance returns. For instance, by allocating 20% to equity long/short strategies, 30% to global macro, 25% to fixed income arbitrage, and the remaining 25% to event-driven strategies, we ensure that our portfolio is not overly concentrated in one area, which helps us avoid significant losses and provides a more balanced risk-reward profile. However, it's essential to strike the right balance. While diversification is crucial, too much diversification can dilute returns and make it challenging to achieve strong performance. For example, having over 50 different strategies can spread our resources too thin and reduce the impact of high-performing strategies. We must be strategic in selecting investments to ensure each contributes meaningfully to our overall goals. It's also important to highlight that diversification should be driven by market views, not merely for the sake of diluting risk. For example, if our market analysis indicates a strong potential in global macro strategies due to expected economic shifts, we should allocate more resources accordingly rather than spreading thinly across less promising areas. This approach ensures that our diversification is purposeful and aligned with our investment outlook. Additionally, we must be mindful of the lock-up periods associated with some hedge funds. Long lock-up periods, such as those extending beyond three years, can limit flexibility and are not always advisable, especially in volatile market conditions where liquidity can be a significant advantage. For instance, a hedge fund with a five-year lock-up period may not be suitable if we anticipate needing liquidity to capitalize on emerging opportunities or navigate market downturns. In summary, while diversification remains key, it is vital to avoid over-diversification and to consider the implications of lock-up periods in our investment strategy. Moreover, our diversification should be based on informed market views to maximize returns. This nuanced approach helps us build a resilient and adaptable portfolio, ready to navigate various market scenarios. #Diversification #RiskManagement #PortfolioManagement #InvestmentStrategy #HedgeFunds
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Director of Communications & Event Marketing: Strategically Orchestrating Communication Excellence and Event Marketing Mastery.
Hedge fund launches surged in the second quarter, outpacing liquidations, according to the latest report. An interesting read on the evolving landscape of hedge funds in Q2 2023: https://zurl.co/cPtu. #HedgeFunds #InvestmentNews #InvestmentOutlook #PensionFunds #FiduciaryDuty
Hedge fund launches spike in Q2, outpacing liquidations
pionline.com
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Hedge fund launches surged in the second quarter, outpacing liquidations, according to the latest report. An interesting read on the evolving landscape of hedge funds in Q2 2023: https://zurl.co/cPtu. #HedgeFunds #InvestmentNews #InvestmentOutlook #PensionFunds #FiduciaryDuty
Hedge fund launches spike in Q2, outpacing liquidations
pionline.com
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JSK Advisory Weekly insight Can organic growth return to hedge funds? - Over the past 8 years, financial performance has almost single-handedly driven growth of hedge funds’ assets under management. Investors have withdrawn money on a net basis in five out of the last seven years - Despite the challenge to organic growth, the global hedge fund industry currently manages over $4 trillion in assets globally, an all-time high, displaying resilience - Private equity's delay in returning capital to limited partners, as highlighted in last week's note, is one factor limiting inflows into hedge funds. Another is underwhelming performance for fundamental hedge funds during the 2022 market trough, and in the years prior to the Covid-era market boom - “Multi-strategies” managers have managed to attract more flows (when they still raise money) than their fundamental peers thanks to better performance through the cycle. We will come back to these in a future weekly insight - Which fundamental hedge fund managers have what it takes to spur a return to organic growth? Source: Financial Times, Hedge Fund Research Performance and net asset flows in the hedge fund industry ($ billion)
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Hedge fund manager? $0-$15 million AUM? Difficulty Raising Assets? What it takes to raise assets goes beyond just performance. Knowing what it takes is crucial. MOST DON'T. YOU? The vast majority of hedge fund managers with very small AUM firmly believe performance will bring assets. What it takes for a manager with small AUM to raise assets has significantly expanded qualitatively and quantitatively. It takes more than performance alone, as investors are idiosyncratically demanding and stringently selective. Raising assets for smaller managers is complex, complicated and confusing. 1) The Truth: Performance only brings a level of attention not assets. 2) The Reality: The majority fail to get AUM beyond personal capital along with small amounts from family and friends. 3) The Result: +50% CLOSE WITHIN 3 YEARS OF LAUNCH. These points are why I started Johnson & Company 12 years ago. My specialty and strength is helping very small hedge fund managers completely understand the "manager-specific" requirements to raise assets. From 25+ years experience, expertise and skill, I know exactly what it takes for new and smaller managers to raise assets. To that end, I have a structured, disciplined, focused and PROVEN PROCESS to work with managers that have small AUM who want results raising assets. The PROCESS is efficient, economical and expedient to get a manager with small AUM prepared and positioned to raise assets faster, easier and cheaper. If you are a hedge fund manager with very small AUM and having trouble raising assets, two (2) actions that will immediately deliver results: 1: Get the FACTS for managers with very small AUM: https://lnkd.in/gRCU_a64 2: Schedule a conversation TODAY: LinkedIn DM or bryan@johnsn.com
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JSK Advisory Weekly Insight Have we reached peak “multi-strat”? - Major "multi-strategy" hedge funds have enjoyed strong growth in assets under management (AuM) since some of them had a near-death experience during the 2008 financial crisis. As we discussed in last week’s post, they are a lone bright spot within a hedge fund sector struggling to attract inflows. The combined AuM of the four largest firms— Millennium, Citadel, Point72, and Balyasny—have surged from $35 billion to over $180 billion, a fivefold increase. Millennium and Citadel have led the race by a comfortable margin - Multi-strategy hedge funds deploy capital across a variety of independently managed trading strategies or pods. This approach aims to maximize returns, increase diversification, and manage risks effectively. Since 2008, multi-strategy funds have generated stronger risk-adjusted results with lower correlations relative to the broader hedge fund universe - Capacity constraints, increasingly expensive talent, and pressure on management and performance fees, despite pass-through models by which limited partners foot the bill for expenses, could dampen growth, as competition stiffens. Some European firms are even entering the field. Will they be able to catch up? Multi-strategy funds asset growth since 2008 Source: Bloomberg
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Partner - Fusion Group. Investment solutions for a changing world. Follow me for posts on alternative investments, private wealth and lifestyle design.
The Era of Multi-Manager Hedge Funds: Boon or Bust? 👇 Recently, FT dove deep into the world of multi-manager hedge funds, exploring their rise, characteristics, and the challenges they face. So, what's the buzz all about? 🔍 What are Multi-Managers? Unlike multi-strategy hedge funds that diversify across different investment styles, multi-manager funds consist of multiple autonomous "pods" or teams, each specializing in different or similar strategies. Firms like Citadel and Millennium have been trailblazers in this space. 💸 The Fee Structure While traditional hedge funds charge fixed management fees and a portion of profits, multi-managers often adopt 'pass-through' fees, passing almost all operational costs onto investors. Though it sounds steep, investors don't seem to mind due to generally better performance. 🌐 Market Footprint According to Goldman Sachs, multi-managers manage $311bn and have a significant market footprint, especially in U.S. equities. However, they also employ substantial leverage, raising concerns about market impact if things go south. 👥 Manpower Intense Though only 8% of the broader hedge fund industry's assets, multi-managers account for 24% of its headcount. ⚠️ Risks & Concerns Investors aren't turning a blind eye to the potential risks, such as market crowding, high leverage, and strategy duplication across firms, which could lead to an industry-wide shakeup if one player falters. As the industry evolves, it's crucial to keep an eye on how these funds continue to shape the financial landscape. #HedgeFunds #MultiManager #Finance #InvestmentStrategies Source: https://lnkd.in/eR7PsZ9q
Across the multimanagerverse
ft.com
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Multi-strat launches dive in Q1 New multi-strategy hedge fund launches took a big tumble in the first three months of the year, accounting for less than 10% of all new funds and down from about 25% in the last quarter of 2023, according to a report by Reuters The report cites figures from data provider Preqin in revealing that launches of multi-strategy funds have fallen to their lowest in around a year since it started collecting the data. Large multi-strategy managers have been in demand with investors in recent years, although according to research by the prime brokerage division at Barclays only seven multi-strat firms manage assets in excess of $10m. Of the 47 multi-manager funds the bank tracks, 32 oversee less than $5bn of assets. New funds have also trailed the performance of established managers over the past three years, with annualised returns of about 7.9%, around 1% lower than existing firms with more than $5bn in assets, according to Barclays. In general, multi-strategy funds, which have outperformed the wider hedge fund sector by an average 1% over the past three years, have had a tough start to 2024, posting an average 3.1% gain for the first three months of the year compared with a 4.4% industry average. #hedgefund #assetmanagement #Q1
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An article from Bloomberg underscores the shifting dynamics within hedge fund management, as illustrated by the recent developments at ExodusPoint Capital Management, LP. Despite an auspicious debut that set records, the fund, helmed by Michael Gelband, has confronted a substantial exodus of capital for the second year running, amounting to a staggering $1 billion in 2023 alone. This continued withdrawal suggests a pronounced shift in investor sentiment, possibly swayed by the comparative allure of secure, high-yield treasuries and the underwhelming performance of high-fee hedge funds. ExodusPoint's response has been to revitalize its operations through strategic staffing, aiming to bolster its equities division and realign itself with the industry frontrunners. The scenario at ExodusPoint highlights a critical juncture for investors and fund managers alike, as they navigate the delicate balance between innovation and stability in an evolving market. The key to longevity, it seems, lies in adaptability and the readiness to reinvent strategy when traditional approaches falter. How do industry professionals perceive the shifts in hedge fund investments in light of such transitions? Are high-fee multi-strategy hedge funds still viable in the face of rising treasury yields and growing investor skepticism? Join the conversation and share your insights below! #HedgeFunds #InvestorSentiment #FinancialMarkets #AssetManagement #WealthManagement #ExodusPoint #StrategicInvesting #FINTRX https://lnkd.in/ddDi3-aQ
ExodusPoint Clients Yanked $1 Billion From Hedge Fund Last Year
bloomberg.com
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