Managing hedge funds: Lighthouse Partners
Investing in hedge funds through managed accounts can resolve retailers' fears about the products, according to Lighthouse Partners managing director Ethan Baron and Certitude Global Investments chief executive Craig Mowll.
Mowll said investors were most worried about liquidity and getting their money when they wanted it, but at the root of the problem was a need for transparency.
Baron said issues of transparency, liquidity and ownership over assets became obsolete when asset managers invested through managed accounts.
"A lot of our peers still will allocate to a manager through their pooled vehicle, and that pooled structure will have its own liquidity terms through a gate or the ability to suspend redemptions," he said.
Investing through managed accounts meant funds could not get "locked up" at the manager level, Baron said.
Mowll said managers who did not invest through managed accounts were now playing catch-up and had to find systems that could integrate with their investment process.
He said the liquidity issues investors have with hedge funds are effects rather than causes and managers who focus on effects have had to manufacture liquidity through investing in cash, in many cases.
"The root cause issue is providing that transparency," Mowll said.
He said high allocations to cash and a bias toward certain strategies created issues for a number of hedge funds that had now started dropping off "because they're not working true to label".
Certitude is compliant with the Australian Securities and Investment Commission's draft disclosure requirements, according to Mowll. He said the company's product disclosure statements would be submitted on 8 August.
"I think we'll be the only hedge fund manager out there that's taken it all completely on board and taken that to market," Mowll said.
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