Eleven managed funds have been given a ‘recommended’ rating in Zenith Investment Partners 2011 Multi Strategy and Fund of Hedge Funds Sector Review.
Based on a score that ranged between 70 and 80 per cent, Advance Alternative Strategies Multi-Blend Fund, Ausbil Dexia Dynamic Alpha Fund, Ironbark Global Diversified Fund, and multi-strategy offering AQR Delta were all rated highly by the investment manager.
Despite industry criticism, Zenith believes fund of hedge funds as an investment option are more preferable to other strategy classes.
The firm stated that in some cases governments and industry regulators around the world have banned hedging during times of market instability, and he concedes that the effect of the global financial crisis for hedge funds was "catastrophic".
Despite this the firm believes that the arguments for fund of hedge funds remain strong, citing access to highly skilled managers, global reach and the ability of the fund of hedge funds to build a diversified portfolio that would be impossible for smaller investors to replicate.
Traditional investment approaches value time in the market and ignore short-term volatility, while fund of hedge funds on the whole look to reduce volatility, and allow investors an increased chance of positive compounding by avoiding large losses over the long-term, the sector review revealed.
Hedge fund beta strategies represent a further development in the hedge fund space, spurred on by the needs of Australian investors who want daily dealing for all asset classes, Zenith stated.
