Retail investors re-evaluate hedge funds
As the market continually fails to meet the highs of pre-2008, fed up retail investors are increasingly looking to equity hedge funds for higher returns, according to Australian Fund Monitors chief executive Chris Gosselin.
Although hedge funds are more widely available in the wholesale market, retail investors are often willing to bear the complexity and higher fees associated with an absolute return fund in search of a more positive return outcome, he said.
"There's a lot of focus on fees, but you should be looking at net return, and if the net returns aren't good enough you should be questioning the performance of the fund manager or the sector you're invested in," Gosselin said.
At the moment, more defensive, market neutral strategies are performing better than some of the more index-concentrated funds that might only have 10 or 20 positions and have large exposures to individual sectors, according to Gosselin.
"There's certainly a move to say there needs to be some flexible asset allocation within equities," he said.
"The problem is there's a huge blanket view that says 'avoid equities, go to cash' just because of risk. I think that's logical but not sensible," Gosselin said.
A financial adviser's concern about the risk of hedge funds should be mitigated by taking into account the type of sector or fund manager they're invested with rather than turning their back on them altogether, he said.
Recommended for you
Infrastructure assets are well-positioned to hedge against global uncertainty and can enhance the diversification of traditional portfolios with their evergreen characteristics, an investment chief believes.
Volatility in US markets means currency is becoming a critical decision factor in Australian investors’ ETF selection this year.
Clime Investment Management is overhauling the selection process for its APLs, with managing director Michael Baragwanath describing the threat of a product failure affecting clients as “pure nightmare fuel”.
Global X will expand its ETF range of exchange-traded funds next month with a low-cost Australian equity product as it chases ambitions of becoming a top issuer of ETFs in Australia.
