Liquidity key for alternatives
Advisers remain wary of the liquidity problems the alternatives sector saw throughout the global financial crisis, but are still looking for that hedge fund type diversification, according to Advance Asset Management.
A lack of liquidity was the main issue plaguing hedge funds in 2008-09, and there is currently a lack of other options in the market providing those traditional hedge fund benefits such as diversified returns and risk premia, low-risk and high alignment of interest, according to Advance’s alternatives portfolio manager Chris Thompson.
Advance is launching a new multi strategy fund in August that aims to capture the benefits of hedge funds without the underlying liquidity issues, he said.
Advance head of advance investment solutions Patrick Farrell (pictured) said advisers have been plagued with the liquidity prospects and the transparency aspect of these types of funds, but this fund solves a lot of the problems advisers have been having with the space.
The fund has been formed in partnership with US alternative manager and fund of hedge funds specialist Ramius Alternative Solutions, and is designed in particular to have a high underlying liquidity, Thompson said.
Ramius will assist Advance with manager selection and act as an extension of the Advance investment and operations team, with both sides to have the power of veto over manager selection, he said.
The fund is also designed to be highly transparent and will initially make public the underlying investments, he said. The solution will essentially be a core/satellite approach with as much as 45 per cent of the fund to be invested in cash solutions such as indices and exchange-traded funds, he added.
It will feature a 0.98 per cent flat fee with a 10 per cent annual performance fee, and is aimed at wholesale investors with a minimum investment of $50,000, he said.
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